Indonesian stocks rose for the first time in five days on speculation the state pension fund bought shares, while rupiah forwards surged and sovereign debt fell on bets the central bank may raise borrowing costs.
The Jakarta Composite Index closed 1.5 percent higher at 4,026.475, after falling as much as 3.3 percent earlier. Rupiah one-month non-deliverable forwards climbed 1.3 percent in the biggest gain since June 25 to 11,545 per dollar as of 5:17 p.m. in Jakarta. The yield on the nation’s bonds due May 2023 rose 11 basis points to 8.86 percent, the highest since February 2011, prices from the Inter Dealer Market Association show.
Bank Indonesia’s board of governors will convene for an extra meeting tomorrow to look at various policies including interest rates and the exchange rate, Deputy Governor Perry Warjiyo said today. The authority kept its reference rate steady on Aug. 15 as second-quarter growth slowed to the least since 2010. PT Jamsostek, the pension fund that manages $13 billion, entered the stock market today, President Director Elvyn Masassya said in a text-message today, without elaborating.
“This was largely driven by buyback from companies as well as stabilization programs by state-owned funds, which include Jamsostek,” said Norico Gaman, head of research at PT BNI Securities in Jakarta. “Foreign investors haven’t been aggressive today.”
State construction firms were among the biggest gainers in the Jakarta index today. PT Wijaya Karya soared 14 percent, and PT Waskita Karya jumped 7.4 percent. PT Adhi Karya rose 10 percent while PT Pembangunan Perumahan gained 9.2 percent. PT Bank Mandiri, the nation’s largest lender by assets, climbed 3.8 percent, the biggest advance since July 23.
The central bank increased borrowing costs by 75 basis points over June and July to 6.5 percent. It may raise the benchmark interest rate by 50 basis points to 7 percent by the year-end, according to David Sumual, chief economist at PT Bank Central Asia in Jakarta. Inflation may be reach 9.2 percent by the end of this year, the fastest pace since 2008, Finance Minister Chatib Basri said today.
“The market is expecting Bank Indonesia to send a very strong signal about tightening tomorrow to calm the market and stabilize the currency,” said Wilianto Ie, head of equities research at Nomura Holdings Inc. in Jakarta.
Rupiah one-month non-deliverable forwards traded at a 5.2 percent discount to the spot rate, which fell 0.2 percent to 10,945, prices from local banks show. The rupiah touched 10,955 earlier, the weakest level since April 2009. A fixing used to settle the forwards set by the Association of Banks in Singapore was 11,294 today, from 11,196 yesterday.
One-month implied volatility, a measure of expected moves in the exchange rate used to price options, rose 19 basis points, or 0.19 percentage point, to 19.93 percent, data compiled by Bloomberg show.
“Market confidence is the issue as the central bank’s stance has been ambiguous between seeking growth or seeking macroeconomic stability, so a rate move would be positive,” said Sumual at Bank Central Asia, the nation’s largest lender by market value. “The rupiah’s weakness has likely snowballed into imported inflation, which adds to reasons for raising rates.”