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.