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.