Stocks rise over news of possible interest rate cut

Stocks rise over news of possible interest rate cut

Arijit Ghosh, Bloomberg/Jakarta

Indonesian stocks rose to four-month highs after the nation's trade minister reiterated that the central bank will be able to cut interest rates in the second half of 2006. PT Bank Mandiri and PT Aneka Tambang (Antam) jumped.

"In our view interest rates have almost peaked," Mirza Adityaswara, an analyst with Credit Suisse First Boston, said in a research note published on Monday. "We recommend investors continue to accumulate good quality interest-sensitive stocks."

The Jakarta Composite Index rose 14.93, or 1.3 percent, to 1175 at the 4 p.m. close, its highest since Aug. 10. The measure rose as much as 2.1 percent. Stocks rose for a seventh day, the longest winning streak since February. About three shares rose for every one that fell in the index.

Bank Mandiri, Indonesia's biggest lender by assets, rose Rp 60, or 3.8 percent, to Rp 1,650. PT Bank Danamon, the nation's fifth-largest lender, added Rp 75, or 1.8 percent, to Rp 4,250. PT Bank Rakyat Indonesia, the fourth-largest lender, gained Rp 50, or 1.7 percent, to Rp 3,050. PT Astra International, the biggest car retailer, rose Rp 300, or 2.9 percent, to Rp 10,600.

Lower interest rates "can help banks stem an increase in non- performing loans as well as help them lower their cost of funds," said Arianto Reksoprodjo, head of research at PT Andalan Artha Advisindo Securities in Jakarta.

The inflation rate will decline in the second half of 2006 and that will give the central bank room to cut rates, Minister of Trade Mari Pangestu said in a Dec. 10 interview in Kuala Lumpur.

Antam, a mining company 65 percent owned by the government, surged to a record after gold rose to a 24-year high in Asia. The shares rose Rp 500, or 16 percent, to Rp 3,625, the highest since the stock began trading in 1997.

The rally in Antam is "driven largely by the gold price," said Ahmad Solihin, an analyst at Macquarie Securities Indonesia, who has a "neutral" recommendation on the stock. "Given that gold accounts for 15 percent to 20 percent of revenue and gross profit, it has run ahead of fundamentals."

Elsewhere, PT Unilever Indonesia fell Rp 75, or 1.7 percent, to Rp 4,300. The stock of the local unit of the world's biggest maker of detergent and shampoo, Unilever NV, remains expensive on "2006 price-to-earnings ratio of 20.4 times, a 70 percent premium to the market," Harry Su, an analyst with PT BNP Paribas Peregrine, who has a "reduce" recommendation on the stock, wrote in a note to investors on Dec. 9.