Indonesian stocks rose, with the benchmark gauge climbing the most in Asia, after the government said it will give financial support to state banks.
The Jakarta Composite Index gained 0.7 percent to 4,872.6 at the close, its steepest rise since May 13. The measure fell to a 13-month low on Monday after Finance Minister Bambang Brodjonegoro said the Indonesian economy is expected to grow 5.4 percent at the most this year, lower than the 5.7 percent forecast in the state budget that was approved by parliament in February.
The government plans to allocate a portion of its 2016 budget for state-run banks in exchange for them cutting interest rates on loans to small businesses, Askolani, director general for budget at Finance Ministry, told reporters in Jakarta today.
“Some investors are utilizing the good news for the banking sector to buy some stocks which have been depressed from the recent drop,” Maynard Arif, head of research at DBS Vickers Securities Indonesia, said by phone from Jakarta. “Valuations of some stocks, especially banks, were already so low.”
With his biggest reforms making little headway, President Joko Widodo has turned to a raft of micro-measures in an effort to revive economic growth. Jokowi, as he is known, is putting his hopes on steps such as removing the luxury tax on golf clubs and horse saddles, and ordering toll road operators to cut tariffs for Eid al-Fitr. The finance ministry also said Tuesday it plans to redirect some power subsidies to poor families.
PT Bank Rakyat Indonesia jumped 3.9 percent, the biggest gainer in the benchmark gauge. PT Bank Mandiri added 1.3 percent and PT Bank Negara Indonesia advanced 2.3 percent. Tobacco company PT Gudang Garam rose 1.8 percent.
The Jakarta index traded at 13.9 times projected 12-month earnings on Monday, the cheapest since Oct. 14. The gauge has fallen 6.6 percent this year, the worst-performing equity index in Asia, data compiled by Bloombeg show.