Stocks rise to month high as bank may cut rate

Stocks rise to month high as bank may cut rate

Naila Firdausi, Bloomberg/Jakarta

Indonesia's key stock index rose to a one-month high after the country's central bank said it may cut interest rates next year as inflation slows. PT Bank Central Asia (BCA) and PT Bank Mandiri paced the advance.

"People are now becoming more optimistic because inflationary pressure seems to be peaking," said Kennyarso Soejatman, who manages the equivalent of US$61 million at First State Investments Indonesia in Jakarta.

PT Perusahaan Gas Negara (PGN) surged to a record on a plan to raise gas prices next year and in 2007.

The Jakarta Composite Index added 17.10, or 1.6 percent, to 1078.18 at the 4 p.m. local time close, the highest since Oct. 18. Gaining stocks led decliners 67 to 28.

Bank Indonesia could cut rates next year as inflation may range between 8 percent and 9 percent in 2006 after averaging 15 percent "plus-minus 1 percentage point" this year, the central bank's Senior Deputy Governor Miranda Goeltom said on Thursday.

Mandiri, the country's biggest lender by assets, gained Rp 20, or 1.7 percent, to Rp 1,210 on optimism lower rates will spur loan demand. BCA, the second largest, added Rp 75, or 2.3 percent, to Rp 3,300.

Inflation in Southeast Asia's largest economy surged to 17.9 percent in October from a year earlier after President Susilo Bambang Yudhoyono's government raised fuel prices at the start of the month to prevent fuel subsidies from draining the nation's coffers. That prompted the central bank to raise its benchmark interest rate to a three-year high of 12.25 percent.

PT Astra International, Indonesia's largest auto retailer that sells most of its cars and motorcycles through loans, advanced Rp 150, or 1.7 percent, to Rp 9,250.

Astra also rose after the company said its motorcycle sales in October jumped 44 percent on the year to 283,672 units. The pace was faster than a 28 percent sales gain by all motorcycle makers in Indonesia during the month.

PGN, Indonesia's biggest energy company by value, jumped Rp 700, or 13 percent, to a record Rp 6,200. Prices for industrial users will be raised to US$5 per million British thermal unit next year and $5.5 in 2007 from $4.5 now, President W.M.P. Simandjuntak told reporters at a briefing in Jakarta.

"PGN will have a significant earnings increase in 2007, 2008 onwards with the company's plan to raise gas prices and also from completion of its pipeline projects," said Isnaputra Iskandar, an analyst at PT Danareksa Sekuritas in Jakarta. He rates the stock a "buy."

Elsewhere, PT Telekomunikasi Indonesia (Telkom), the nation's biggest telephone company, gained Rp 150, or 2.9 percent, to Rp 5,300.

Telkom expects sales to rise 20 percent next year as the company plans to expand its network to attract more users, President Arwin Rasyid said on Thursday. The company also expects this year's revenue to increase 20 percent, Rasyid said. That's higher than the 18 percent sales gain estimated in August.