Stock index has biggest drop on oil price

Stock index has biggest drop on oil price

Bloomberg, Jakarta

Indonesian stocks fell, dragging the Jakarta Composite Index to its biggest loss in a month, on concern that record high oil prices may slow economic growth. PT HM Sampoerna and PT Telekomunikasi Indonesia led declines.

The index dropped 6.234, or 0.7 percent, to 849.826 at the 4 p.m. close in Jakarta. It was the biggest percentage drop since Sept. 9. In all, 54 shares fell, 62 rose and 221 were unchanged.

The government subsidizes fuel costs, especially kerosene for the poor. Half of Indonesia's population lives below the poverty line, the World Bank says. The annual fuel subsidy now stands at an estimated Rp 59.2 trillion (US$6.5 billion), from the Rp 14.5 trillion planned at the beginning of the year, or enough to pay the budget deficit 2.3 times over.

"Rising oil prices will slow growth as the government must switch spending to fund the swelling fuel subsidy," said Fitri Murniawati, an analyst at PT BNI Securities in Jakarta.

The central bank has said it may raise interest rates to curb inflation. Higher interest rates draw investors from equities to bonds.

Sampoerna, the country's second-largest publicly traded cigarette maker, fell Rp 250, or 4.1 percent, to Rp 5,850. Telekomunikasi, the country's biggest telephone company, fell Rp 25 rupiah, or 0.6 percent, to Rp 4,275.

Bank Rakyat Indonesia, the fourth-biggest lender by assets, fell Rp 75, or 3.5 percent, to Rp 2,075. Bank Central Asia, the second largest, fell Rp 25, or 1.1 percent, to Rp 2,250.

Crude oil for November delivery rose as much as 0.4 percent to $52.24 a barrel in after-hours electronic trading on the New York Mercantile Exchange, the highest since the futures began trading in 1983. It was at $52.21 at 12:17 p.m. Singapore time.

Bank Permata, the nation's seventh-largest lender, rose Rp 25 rupiah, or 2.5 percent, to Rp 1,025. The government will name a preferred bidder for a 51 percent stake in the state- controlled lender tomorrow.

PT Ramayana Lestari Sentosa, the biggest retailer by value, fell Rp 75, or 1.7 percent, to Rp 4,425 on a report that it had slower-than-expected sales. Ramayana indicated that sales in August were Rp 278.8 billion and Rp 76 billion in September, said Rani Sofjan, an analyst at PT Mandiri Sekuritas, in a note to clients.

Both figures "were below management targets," Sofjan said. "We are likely to downgrade our Ramayana earning estimates for this year."