Stock index up on falling SBI rates

Rendi A. Witular, The Jakarta Post, Jakarta

The Jakarta Composite Index extended gains on Thursday driven by a further drop in Bank Indonesia interest rates, continuous buying of banking stocks, and bustling trade in second-level shares.

The index rose 6.634 points, or 1.3 percent, to 511.166 at the close of the market with around 1.5 billion shares worth Rp 752 billion (US$91.1 million) traded. Some 125 stocks advanced, and 35 retreated.

"The central bank's move to cut its interest rates has created (positive) sentiment and pushed the index up," said Budi Ruseno, an analyst at brokerage house PT Bhakti Capital.

Bank Indonesia again cut its benchmark interest rate to 10.27 percent during the weekly auction of its SBI promissory notes on Wednesday compared to the previous week's level. The interest rate on the three-month SBI notes also declined to 10.18 percent from 10.88 percent. The lower rates are expected to subsequently push down bank deposit rates.

Trading activities in some second-liners were seen very active during the day. These included stocks in PT Semen Cibinong, which rose Rp 25 to Rp 290 per share, PT Dynaplast, which went up by Rp 125 to Rp 1,350, and PT Dankos Laboratories increased to Rp 975 from Rp 925.

Bluechip companies like PT Astra International, PT Telkom, and PT Indofood Sukses Makmur also saw the prices of their shares moved upward, respectively to Rp 3,600 (up by Rp 25), Rp 460 (Rp 50), and Rp 950 (Rp 50).

Budi also said positive sentiment over the initial public offering plan of Bank Mandiri prompted some investors to continue buying bank shares.

Bank Central Asia closed higher at Rp 2,775, up Rp 50. So did Bank Danamon which increased to Rp 1,325, Bank Panin (Rp 305), Bank Mega (Rp 1,075) and Bank Lippo (Rp 525).

The market is betting that there would be a strong demand for the IPO, thus creating the possibility that the price of the shares would move up once they are listed. This may also push the prices of other bank shares higher.

Stronger regional markets and the strengthening of the rupiah against the U.S. dollar to a 34-month high of Rp 8,140 per dollar at midday Thursday, have also contributed to the rally in the local stock market.

Japan's Nikkei 225 Stock Average rose 1.2 percent higher to 8657.23 and the South Korea's Kospi index advanced 0.3 percent, while Taiwan's TWSE Index rose 1.3 percent to a four-month high.

Budi said that on Friday, the stock market was expected to see some profit taking, with the index trade in a 508-516 range.

For next week, the index may test a second resistance level of around 523.