Indonesian Stocks Climb First Time in Five Days as Pension Buys

Indonesian stocks rose for the first time in five days after valuations sank to a 14-month low and the nation’s biggest pension fund said it’s buying. The rupiah slid to the weakest level in four years and bonds fell.

The Jakarta Composite Index added 1 percent to close at 4,218.45. The gauge traded yesterday at 12.26 times projected 12-month profit, the lowest level since June 2012, data compiled by Bloomberg show. The rupiah dropped beyond 10,800 per dollar today for the first time since April 2009, prices from local banks show. The yield on 10-year government bonds rose to the highest level since March 2011.

PT Jamsostek, which oversees about $13 billion, is increasing purchases of the largest Indonesian stocks, President Director Elvyn Masassya said yesterday. The Jakarta index has tumbled at the fastest pace worldwide this quarter amid concern the rupiah’s retreat will fuel the quickest inflation in four years and lead to tighter monetary policy. Speculation that the U.S. Federal Reserve will soon reduce stimulus, making it harder for Indonesia to fund its record current-account deficit, has contributed to the declines.

“Indonesian asset prices are cheap for those who can withstand this bad economic weather,” Alvin Pattisahusiwa, director of investment at PT Manulife Aset Manajemen Indonesia, the country’s second biggest mutual fund manager with 12.8 trillion rupiah ($1.2 billion) worth of assets under management. “If they are willing to invest and keep it for at least one year, then this is the time.”

Trading volumes in Jakarta index companies were 64 percent higher than the 30-day average today, according to data compiled by Bloomberg. The gauge had fallen 11 percent during the past four days and was down 12 percent this quarter.

State Buying

PT Telekomunikasi Indonesia gained 5.3 percent, the biggest increase since June 27, contributing most to the gauge’s rebound. The country’s biggest cement producer PT Semen Indonesia climbed 8.4 percent. PT Unilever Indonesia, a unit of world’s second-largest consumer goods company, rose 2.1 percent.

State-owned Jamsostek is buying major companies and will increase its holdings of shares to between 22 percent and 25 percent of assets under management, Masassya said in a mobile-phone text message late yesterday. Around 19 percent of the investment vehicle’s holdings were in stocks, he said June 19.

“Jamsostek will enter the stock market with a long-term market horizon,” Masassya said. “We are buying blue-chip stocks.”

Indonesia’s central bank is coordinating with the nation’s securities regulator to stabilize financial markets, Deputy Governor Perry Warjiyo said in a mobile-phone text message yesterday.

Technical Rebound

The Jakarta gauge pared losses toward the end of the day yesterday, closing 3.2 percent lower after falling as much as 5.8 percent. Its 14-day relative strength index declined to 26.6, below the 30 threshold that some investors see as an indication a rally rebound is imminent.

“This is just a brief technical rebound,” Akbar Syarief, a money manager at MNC Asset Management, which oversees about $485 million, said by phone from Jakarta. “I still think the downside remains as there is no change to our fundamentals.”

Foreigners sold $182 million of the nation’s shares yesterday, the most in two months. Inflation reached 8.6 percent in July, the fastest pace since February 2009. The current-account deficit swelled to $9.8 billion in the second quarter, the most in data compiled by Bloomberg going back to 1989, the central bank reported on Aug. 16.

The rupiah dropped 0.8 percent to 10,775 per dollar, the weakest since level since April 2009, according to prices from local banks. It traded at a 4.2 percent premium to the one-month non-deliverable forwards, which fell 1.4 percent to 11,228 per dollar, data compiled by Bloomberg show.

Policy Package

The yield on the nation’s bonds due May 2023 climbed one basis point, or 0.01 percentage point, to 8.51 percent, after reaching 8.54 percent earlier, the highest level since March 2011, prices from the Inter Dealer Market Association show.

President Susilo Bambang Yudhoyono said the government will announce a policy package on Aug. 23 to address economic problems. Manulife’s Pattisahusiwa said the government needs to target the trade balance, income repatriation and to coordinate more closely with Bank Indonesia.

“The biggest risk for investors is macroeconomic uncertainties,” Pattisahusiwa said. “The market could react positively after that announcement. It is more about boosting market confidence.”

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