Stock index soars to 43-month high

Stock index soars to 43-month high

Dadan Wijaksana, The Jakarta Post, Jakarta

The Jakarta Composite Index reached its highest level since early
2000 to break the psychologically important level of 600 points
on Wednesday, thanks mostly to continued capital inflows into the
local stock market.

The index closed at 605.62 on volume of 1.69 billion shares
worth Rp 996.64 billion (US$118.5 million), 2.9 percent higher
than the previous day's closing of 588.51.

Dealers attributed the sharp rise to the heavy buying of blue-
chip shares, mostly by foreign investors, with state
telecommunications firm PT Telkom leading the gainers.

Trading was also boosted by the declining trend in short-term
bond yields -- which helped encourage a switch of investment from
the bond to share market to seek higher and quicker returns --
coupled with Wall Street overnight gains, the dealers added.

The central bank, in its latest weekly auction, slashed its
key interest rate to an all-time low of 8.66 percent, from 8.70
percent the week before.

The recent rally of the Jakarta stock index, despite its
limited impact on the overall economy, should be of high
importance given that stock market performance is a key factor in
gauging the confidence of investors in the economy.

That has been the case for Indonesia since the start of the
year, although the economy has yet to pick up optimally -- due to
foreign direct investment being continuously in the doldrums. The
stock index and the rupiah on the other hand have been bullish.

It remains to be seen whether the positive prospects of the
index and the local unit will be translated into returned
confidence on the part of foreigners, a prerequisite to boosting
direct investment activities.

Elsewhere, Wednesday's trading saw Telkom soar by 9.1 percent
to a record high of Rp 6,000, Rp 500 higher than the previous
closing, while another state telephone operator, Indosat, gained
1.1 percent to close the day at Rp 9,500.

Indosat's positive sentiment was also helped by its plan to
sell its stake in Mitra Global Telekomunikasi Indonesia (MGTI),
which runs fixed-line operation in Central Java. It owns 30.5
percent of MGTI.

Shares in the country's top cigarette makers Gudang Garam and
Sampoerna were also among the gainers, jumping by Rp 300 and Rp
250 to close at Rp 11,000 and 5,650 respectively.

The country's largest auto producer Astra International was up
Rp 50 rupiah at Rp 4,375, while heavyweight Bank Central Asia
(BCA) rose Rp 75 at Rp 3,275.

In total, gainers led decliners 78 to 48, with the remainders
unchanged.

Meanwhile, the rupiah closed lower on Wednesday against the
U.S. dollar, although dealers predict a better future for the
local unit, due to an expected inflow of funds from overseas for
the purchase of local assets up for sale.

The rupiah closed at 8,440 per dollar, down from a close of Rp
8,415 a day earlier, as corporations moved to buy dollars to meet
their obligations.

The government is gearing up to sell a 30 percent stake in
Bank Rakyat Indonesia (BRI), the country's largest micro
financing bank, next month through an initial public offering.

Although it is be unlikely to be as successful as the sale of
the giant Bank Mandiri, high notes have been given also to BRI
given its strategic place in the country's banking industry.