Indonesian stocks rose the most in two weeks, leading gains in emerging markets, as Morgan Stanley upgraded the country’s shares and Turkey’s interest-rate increase stemmed a rout in developing-nation currencies. The rupiah strengthened while government bond yields fell.
The Jakarta Composite Index climbed 1.7 percent to close at 4,417.35, its steepest advance since Jan. 13. The rupiah appreciated 0.2 percent to 12,166 per dollar, prices from local banks show. The government’s 8.375 percent bonds due March 2024 rallied for a second day, sending yields down 15 basis points to 8.83 percent, according to the Inter Dealer Market Association.
Morgan Stanley raised its recommendation to equalweight from underweight, citing an improvement in the country’s trade balance and cheaper valuations, according to a report dated yesterday. The Jakarta index will probably rally as much as 20 percent by year-end, said PT Manulife Asset Management Indonesia, the nation’s second-largest money manager. Emerging-market stocks and currencies advanced today after Turkey more than doubled its benchmark interest rate to defend the lira and curb capital outflows.
“We have observed positive signs along multiple fronts in Indonesia, including an improvement in the trade balance, further currency adjustment, an appropriate monetary policy response to the increase in the global risk-free rate and on the ground infrastructure delivery in Jakarta,” Yang Bai, an analyst at Morgan Stanley, wrote in the report.
Cement producers PT Indocement Tunggal Prakarsa and PT Semen Indonesia rose at least 2.5 percent while PT Telekomunikasi Indonesia, the nation’s biggest phone company by market value, gained 3.7 percent. Morgan Stanley highlighted the stocks in its note.
Indonesia’s trade balance swung to a $24.3 million surplus in October, followed by a $776.8 million surplus in November, according to official data. It was in deficit for seven of nine months last year through September.
The Jakarta index, which has added 3.4 percent this month, will extend gains as the rupiah’s slide during the past year boosts export earnings, while election spending supports consumer and media companies, Alvin Pattisahusiwa, who oversees about $3.3 billion as the chief investment officer at Manulife, said in a phone interview yesterday.
Political parties in Southeast Asia’s biggest economy typically boost advertising spending while distributing food, consumer staples and t-shirts to supporters before polls. Parliamentary elections are due on April 9 and the first round of a presidential vote is scheduled for July 9.
Foreign investors have purchased a net $190 million of Indonesian equities this month through yesterday, according to data compiled by Bloomberg. Investors may be rotating to Indonesia from Thailand, where political turmoil has spurred capital outflows, according to Nomura Holdings Inc.
The Jakarta gauge is valued at 13 times estimated earnings for the next 12 months, down from about 16 times in May, according to data compiled by Bloomberg.