Stocks up after nightmare run, rupiah down

Rendi A. Witular, Jakarta

After experiencing sharp losses a day earlier, the Jakarta Stock Market ended slightly higher by 1.15 percent on Tuesday as bargain hunters purchased shares amid gains at other Asian bourses.

The Jakarta Composite Index ended up 7.675 points to 676.152, from a day high of 683.259. Volume was 1.73 billion shares worth Rp 1.17 trillion (US$130 million).

Heavyweight state telecommunications firm PT Telkom led gains in selected blue chips, as it ended higher by Rp 100 to Rp 6,700. Its rival PT Indosat also gained Rp 50 to end at Rp 3,325.

Automotive kingpin PT Astra International rose by Rp 300 to Rp 5,400, while cigarette producer PT Gudang Garam surged by Rp 100 to Rp 12,950.

Stock analyst Arwani Pranadjaya of Mandiri Securities said that gains in regional markets had encouraged local bargain hunters to step into the market following recent losses, which made local stock prices considerably low.

"I may say that it was not a rebound, because the increase was not that significant compared to the huge losses on Monday. It was just bargain hunting and consolidation. The market was still cautious over unfavorable global sentiment," said Arwani.

He explained that jitters over rising inflation at home following the weakening of the rupiah and the rising of oil prices, which may burden local manufacturers, would remain a barrier for the Index to rise in the next couple of weeks.

The prospects of higher interest rates in the U.S. and a slowdown in China's economy as the latter struggles to cool down an overheating economy will put further pressure on the stock market, he said.

The combination of the aforementioned economic issues coupled with political uncertainty ahead of the July presidential election caused heavy losses in the Index on Monday, as it tumbled by 7.5 percent, the biggest one-day decline in the history of the Index.

Meanwhile in Japan, Tokyo's Nikkei Stock Average of 225 issues surged 206.04 points, or 1.96 percent, to 10,711.09 after the Japanese government said gross domestic product had risen by 1.4 percent in the first quarter of this year, higher than analysts projected.

Hong Kong's Hang Seng Index surged 104.74 points, or 0.95 percent, to 11,072.39.

Elsewhere, the rupiah failed to track down gains in the stock market as it ended lower against the U.S. dollar following panic buying by the corporate sector due to jitters caused by political, security and economic uncertainty at home and the strengthening of the greenback against most regional currencies.

The rupiah closed at Rp 9,070 to the dollar, down from Rp 9,010 on Monday.

Director of Currency Management Group Farial Anwar said many corporations had decided to keep their dollars because they feared that the rupiah's depreciation would last for a long period of time, thus burdening their costs for imported materials and dollar-denominated debts.

"Panic buying by the corporate sector has weakened the rupiah. They seem to dismiss the recent comments by central bank officials that the weakening of the rupiah is temporary, and indeed I agree with them," said Farial.