Stock index has biggest drop in three week

Stock index has biggest drop in three week

Naila Firdausi, Bloomberg/Jakarta

Indonesia's key stock index had its biggest drop in three weeks.
PT Telekomunikasi Indonesia (Telkom) and PT Unilever Indonesia
led declines after the rupiah weakened for a fourth day, raising
concerns of higher import and debt costs.

"A weaker rupiah makes investing in Indonesian assets
unattractive," said Kennyarso Soejatman, who helps manage about
US$60 million at First State Investments Indonesia in Jakarta.

The Jakarta Composite Index fell 12.45, or 1.1 percent, to
1090.54 at the 4 p.m. local time close, its biggest drop since
Sept. 22. Declining stocks led gainers 70 to 38.

The rupiah lost 0.4 percent to 10,146 against the dollar at
4:03 p.m. local time. A weaker currency boosts the cost of
importing components and machinery and increases repayments on
foreign debt.

Telkom, the nation's biggest telephone company which had $841
million debt as of June 30, declined Rp 100, or 1 percent, to Rp
5,100.

Unilever, the biggest maker of food and soap, lost Rp 25, or
0.5 percent, to Rp 4,600. More than half of the company's costs
are linked to the dollar, it said earlier.

Banks fell on concern the rupiah's decline may prompt the
central bank to raise interest rates, hurting demand for loans
and increasing costs to pay depositors.

PT Bank Mandiri, the biggest lender by assets, fell Rp 30, or
3.1 percent, to 1,410. PT Bank Danamon, the fifth-largest,
dropped Rp 175, or 4.2 percent, to Rp 3,975.

"The outlook for banks is not good," First State's Soejatman
said. "There are rising non-performing loans, while demand will
slow on rising interest rates."

PT Astra International, Asia's biggest automobile retailer,
dropped Rp 200, or 2.2 percent, to Rp 9,100. More than 70 percent
of car purchases in Indonesia are funded through loans.

PT Toyota-Astra Motor, Astra's venture with Toyota Motor
Corp., said on Wednesday automobile sales in Indonesia by all
makers declined 2.9 percent in September from a year earlier.

Analysts expect sales of vehicles in Southeast Asia's biggest
economy to slow after the government on Oct. 1 more than doubled
auto diesel prices and raised gasoline charges by 88 percent to
cut fuel subsidies.

"We expect October and November sales to further slow down due
to the fuel price hike" and the Idul Fitri holiday, Irwan Junus,
head of research at PT Mandiri Sekuritas, wrote in a note to
clients on Thursday. Idul Fitri, which marks the end of the
Islamic fasting month of Ramadan, will be held next month.

PT Barito Pacific Timber, the nation's biggest plywood maker,
lost Rp 50, or 7.1 percent, to Rp 650. Indonesia's exports of
plywood will probably fall 50 percent this year to 1.5 million
cubic meters because of slowing demand and lower prices, Bisnis
Indonesia reported, citing Soewarni, head of the Association of
Forestry Industry Revitalization.