Stocks fall for a third day on inflation concerns
Stocks fall for a third day on inflation concerns
Claire Leow and Aloysius Unditu, Bloomberg, Jakarta
Indonesian stocks fell for a third day. Lenders such as PT Bank Central Asia led declines on concern the government is struggling to contain inflation, prompting speculation the nation faces higher interest rates.
The Jakarta Composite Index fell 9.12, or 0.9 percent, to 1043.7 at the 4 p.m. local time close, the lowest since Sept. 28. More than two stocks dropped for each that rose.
Inflation jumped to a six-year high of 17.9 percent in October as the government cut fuel subsidies, boosting retail prices of gasoline. The central bank on Nov. 1 raised its benchmark interest rate for a fifth time in nine weeks to rein in inflation and support the rupiah.
"Banks are now faced with an accelerated rising interest- rate environment," said Darmawan Halim, an analyst at Mandiri Sekuritas. "The faster-than-anticipated interest rate hike will have further negative effects on banks' performance."
PT Bank Central Asia, the largest lender by market value, fell Rp 50, or 1.6 percent, to Rp 3,000 on concern higher rates will damp loan demand.
PT Bank Negara Indonesia, the third-largest lender, lost Rp 50, or 4 percent, to Rp 1,200. PT Bank Rakyat Indonesia, the fourth-largest lender, dropped Rp 75, or 3.1 percent, to Rp 2,375. PT Bank Danamon, the fifth-biggest bank, fell 175, or 4.6 percent, to Rp 3,675.
The yield on Indonesia's one-month central bank bills, a benchmark lending rate, rose to 12.25 percent at an auction yesterday from 11 percent on Oct. 26, the central bank said.
Better Coordination
Yesterday, President Susilo Bambang Yudhoyono said the government will aim for better coordination with the central bank to help bring inflation below 10 percent by the end of 2006. The current benchmark rate of 12.25 percent is still lower than inflation, signaling to investors the bank still has room to increase rates.
Elsewhere, PT Bakrie & Brothers, a company with interests from property to telecommunications, rose after it said it expects sales to double this year to Rp 2.5 trillion (US$249 million), helped by its plantation and construction businesses. The shares climbed Rp 5, or 5 percent, to Rp 105.