Rate Expectations Push JCI to Record High
The Jakarta Composite Index surged to a new all-time high and the rupiah hit its strongest level in more than two years on Monday as investors, mostly foreign funds, snapped up domestic stocks on expectations that the central bank will keep its benchmark interest rate at a record low today.
Analysts said low interest rates would help boost economic growth, and investors were turning to Asian countries, including Indonesia, in search of higher returns as the recoveries in the United States and Europe struggled to gain traction.
The JCI rose 57.25 points, or 2 percent, to close at 2,887.24, surpassing its previous record close of 2,830 on Jan. 9, 2008.
The benchmark index has climbed 15 percent this year, making it the best-performing stock market in Asia, excluding the Osaka Hercules in Japan.
“Foreign investors focused on buying blue chip stocks, which was reflected in the rupiah’s appreciation,” said Syaiful Adrian, an equities analyst at PT Ciptadana Sekuritas.
PT Astra International and PT Bank Central Asia led the JCI’s gains on Monday. Astra International surged 4.9 percent higher to close at a record Rp 46,700. BCA, Indonesia’s largest lender by market value, gained 5.5 percent to Rp 5,750.
“Astra benefits from low interest rates, as about 80 percent of domestic vehicle sales are funded by financing companies,” Handiman Soetoeyo, an analyst at PT Financorpindo Nusa, told Bloomberg. “Banking shares are worth collecting because interest rates are still low.”
Meanwhile, the rupiah reached its highest level in more than two years, trading at 9,058 against the dollar as of the stock market’s close, compared with 9,080 on Friday.
“Foreign investors are focused on Asian countries, including China and Indonesia,” said Ari Pitojo, an equities analyst at PT Mandiri Sekuritas.
Janson Nasrial, an equities analyst at PT eTrading Securities, said easing inflation in March would prompt Bank Indonesia to keep the benchmark interest rate at its current record low of 6.5 percent. He said surging 2009 profit growth from domestic companies would likely drive the JCI to the 3,000-point level soon.
“On the domestic front, strong economic fundamentals are the main factor driving the buying of local stocks by foreign funds,” Janson said.
Syaiful also predicted the JCI would hit 3,000 points in the next month or two. “Technically, the market might have been overbought but it is now trending up for fundamental reasons,” he said, adding that its price-to-earnings ratio is 15 times, compared to its historical high of 20 times.
Many Asian stock markets were closed for Easter on Monday, but those open were mostly higher after an encouraging US jobs report offered the latest sign the global economy was on the mend. Japan’s Nikkei 225 rose 0.4 percent and Singapore’s benchmark index rose 0.4 percent.