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Indonesian shares posted strong gains on Thursday, with better-than-expected earnings from a number of key banking companies fueling the buying, mainly by foreign investors, analysts said.

They said investors focused on blue chips and Bakrie group stocks, while the rupiah’s continued rise against the US dollar and the expectation of further rate cuts by the central bank also bolstered sentiment.

The Jakarta Composite Index rose 72.31 points, or 3.25 percent, to 2,298.14, the highest close since July 31 last year. The benchmark index has gained 70 percent this year, making it Asia’s second-best performing market, according to Bloomberg. Some 9.8 billion shares worth Rp 7 trillion ($707 million) changed hands. Gainers led losers 161 to 55, with 56 stocks unchanged.

Saiful Adrian, an analyst at PT Ciptadana Sekuritas, said the better-than expected earnings reports were confirming to investors that the country’s economy was proving resilient to the global crisis. “Earnings were the main factor boosting the index,” he said.

Edwin Sinaga, an analyst at PT Financorpindo Nusa, said foreign investors were net buyers by Rp 1.2 trillion. “[Foreign investors] are buying stocks for the future,” he said, including Bakrie group stocks.

Saiful said the strengthening of the rupiah against the dollar — the rupiah at one point moved above 9,950 — indicated foreign funds were entering the country.

“On the domestic front, the expectation that the BI rate could be cut by another 25 basis points from the current 6.75 percent also spurred buying interest in banking stocks,” he said.

Purbaya Yudi Sadewa, head of the economics team at PT Danareksa Sekuritas, said foreign investors were putting their money in the country because of the positive economic outlook.

The economy is expected to expand by as much as 4 percent this year, the fastest pace among major Asian economies after China and India, the International Monetary Fund has predicted.

Saiful said Indonesia’s credit rating could be upgraded over the next six months to a year, reducing the country's perceived risk.
Banking stocks were among the biggest gainers on Thursday following announcements of strong first-half results from several companies.

Bank Mandiri shares jumped 6.08 percent to close at Rp 3,925, Bank Central Asia (BCA) added 2.05 percent to close at Rp 3,725 and Bank Negara Indonesia (BNI) gained Rp 100, or 5.6 percent, to Rp 1,880. Bank Rakyat Indonesia rose Rp 450, or 6.4 percent, on hopes of strong first-half results.

PT Bumi Resources surged Rp 225, or 10.23 percent, to Rp 2,425 on expectations that a bond sale by one of its units may help the company fund expansion plans. PT Bakrie Development gained Rp 45, or 14.29 percent, to Rp 360.

PT Telkom rose Rp 550, or 6.2 percent, to Rp 9,400, while PT Astra International added Rp 1,000, or 3.69 percent, to Rp 28,000 on hopes of higher car sales.