Stocks climb after BI ups key rates

Stocks climb after BI ups key rates

Naila Firdausi, Bloomberg/Jakarta

Indonesia's key stock index closed at its highest in almost 17 weeks after the central bank raised interest rates less than some economists had expected. PT Bank Rakyat Indonesia (BRI) and PT Astra International paced gains.

Stocks also advanced after the rupiah climbed to its strongest level in almost four months on speculation the appointment of new ministers will spur economic growth.

The Jakarta Composite Index climbed 27.93, or 2.5 percent, to 1151.37 at the 4 p.m. local time close, its highest close since Aug. 12. The gain, the biggest jump since Sept. 30, was the biggest fluctuation among indexes included in global benchmarks. All nine industry groups rose.

Bank Indonesia on Tuesday raised a key interest rate by half a percentage point to 12.75 percent, less than the 13.25 percent median forecast of 10 economists in a Bloomberg survey. The increase was less than a 1.25 percentage point rise on Nov. 1.

"Investors are responding positively to the less-than- expected increase, which signals the central bank won't be too aggressive in raising rates," said Winston Sual, who helps manage about $101 million at Panin Asset Management in Jakarta.

BRI, Indonesia's fourth-largest lender by assets, added Rp 75, or 2.6 percent, to Rp 3,000. Astra, the nation's biggest auto distributor that sells most of its cars and motorcycles through loans, climbed Rp 350, or 3.6 percent, to Rp 10,000, the highest close since Sept. 19.

PT Bank Mandiri, the country's largest lender, jumped Rp 90, or 6.4 percent, to Rp 1,490, the biggest advance since Aug. 30. Credit Suisse First Boston analyst Roger Lum raised the stock to "outperform" from "neutral".

The rupiah gained as investors bet new ministers will introduce policies to control inflation and boost investment. President Susilo Bambang Yudhoyono on Wednesday swore in former minister of finance Boediono as chief economics minister while state minister of national development planning Sri Mulyani Indrawati moved to the finance portfolio.

The rupiah rose to as high as 9,823 a dollar, its strongest since Aug. 12. It was at 9,826 a dollar at 4:18 p.m. The currency has gained 2 percent against the dollar while the Jakarta Composite has climbed 5 percent since Susilo flagged the planned changes to his cabinet on Dec. 2.

"Investors are optimistic the new economic team can deliver on their low inflation promise," said Raymond Gin, who helps manage the equivalent of US$800 million at PT Manulife Aset Manajemen Indonesia in Jakarta. "The large and liquid stocks are the best to invest in as they are interest rate-sensitive."

PT Telekomunikasi Indonesia (Telkom), the nation's biggest telephone company, gained Rp 200, or 3.6 percent, to Rp 5,800, the highest close since July 22, on expectations a stronger rupiah will cut the cost of servicing foreign debt. The company has about $850 million in dollar debt.

PT Indofood Sukses Makmur, the world's biggest maker of instant noodles, increased Rp 60, or 6.7 percent, to Rp 950, its biggest gain since a 7.6 percent jump on Sept. 9. A stronger local currency will reduce the cost of importing ingredients such as wheat.

"Investors see the new cabinet as committed to curbing inflation," said Budi Budar, who helps manage about $91 million in assets at PT NISP Sekuritas in Jakarta. "That helps the rupiah and improves corporate earning outlooks."

More than 2 billion shares worth Rp 1.67 trillion ($170 million) changed hands on Wednesday, almost double the three- month daily average trading value of Rp 850 billion.