Indonesia Stocks Rise to Record on Widodo’s Subsidy Plans

Indonesia’s benchmark stock index rose to a record and government bonds gained as speculation President-elect Joko Widodo may raise fuel prices next month lifted investor confidence.

The Jakarta Composite Index rose 0.4 percent to 5,224.135, its highest close since Bloomberg began compiling the data in 1983. The government may increase subsidized fuel prices, aiming to free up state funds for investments in Southeast Asia’s largest economy, Arif Budimanta, a member of Widodo’s economic team, said in an interview in Jakarta late yesterday.

The gauge has risen 22 percent this year, on course for its best annual advance since 2010, amid bets that money saved from fuel subsidies will allow the government to boost spending on infrastructure development. The index had dropped more than 20 percent from its previous high in May 2013 through August, amid concerns that reduced Federal Reserve stimulus would spur capital outflows.

“Widodo’s plan to raise subsidized fuel prices as early as October is seen as positive news by investors,” Jeffrosenberg Tan, a fund manager at Sinarmas Asset Management in Jakarta, said by phone today.

Widodo’s presidential term begins next month after he overcame a challenge by Prabowo Subianto to the vote count in the July presidential elections.

The benchmark equity index trades at 15.2 times its 12-month estimated earnings, compared with a five-year average of 13.7 times, according to data compiled by Bloomberg.

PT Bank Negara Indonesia, the country’s fourth-largest lender by assets, gained 2.3 percent to the highest close since June 1999. PT Adaro Energy advanced 2.6 percent to a 17-month high. Plantation company PT Sampoerna Agro jumped 5.3 percent. A gauge of agricultural stocks rose 1.4 percent, the most among the 10 industry groups in the benchmark index.

The yield on Indonesia’s 8.375 percent bonds due March 2024 dropped five basis points, or 0.05 percentage point, to 8.11 percent, according to prices from the Inter Dealer Market Association. That’s the lowest level since Aug. 1.

Before it's here, it's on the Bloomberg Terminal.