Stocks continue to rally, at highest level in 3.5 years

Dadan Wijaksana, The Jakarta Post, Jakarta

The Jakarta Composite Index achieved its highest level on Thursday since early 2000 thanks to continued buying of blue chips shares, as regional markets took advantage of Wall Street's overnight rally.

The Jakarta stock index ended up at 2.3 percent at 619.59 from Wednesday's closing, with 1.26 billion shares valued at Rp 1.04 trillion (US$124.03 million) exchanging hands.

The index was off to an intraday high of 623.79 before being dragged down by suspected profit-taking, according to dealers.

Still, the closing was the highest since February, 2000.

Analysts have said that despite its limited direct impact on the country's overall economy, the recent rally of the index should be a measure to gauge investor confidence in the country's economy.

Although the economy has yet to pick up due to a decline in direct foreign investment, the stock index and the rupiah have been bullish over the past several months.

It remains to be seen whether the positive prospects of the index and the local unit indicate the return of foreign investors' confidence in the country. If this is the case, Indonesia could expect a boost in foreign direct investment in the near future.

As for Thursday's sharp rise, dealers attributed the rally to a combination of positive news from both external and internal sides.

While the rising optimism over the U.S. economy -- attributable to a 2.1 percent and 2.5 percent overnight rise in the Dow Jones and Nasdaq index respectively -- has supported the rally of regional markets including Jakarta's, news at home has helped as well.

Stable rupiah and a continued fall in key short-term bond yields also boosted the sentiment in the market and spurred buyings, dealers said.

The central bank, in its latest weekly auction, slashed its key interest rate to a historic low of 8.59 percent from 8.66 percent the week before.

In total, gainers outweighed decliners 101 to 35, with gains in the state telecommunication firm Telekomunikasi Indonesia (Telkom) leading the gainers.

Telkom rose by Rp 350, or 5.7 percent, at a record high of Rp 6,450, followed closely by the country's long-distance call operator Indosat which gained Rp 250 to close at Rp 9,600.

Other big gainers were carmaker Astra International, leading cigarettemakers Gudang Garam and Sampoerna, which were up by 3.3 percent, 1.8 percent and 0.6 percent, respectively.

Astra, the largest auto producer in the country, was up Rp 150 to Rp 4,675.

Gudang Garam closed higher at 11,500, while Sampoerna gained Rp 25 at 4,500.

Heavyweight Bank Central Asia (BCA) was also up Rp 100 at Rp 3,450.