Indonesian Stocks Rise Most Since July as Rupiah, Bonds Advance

Indonesian stocks rose the most since July as the rupiah and bonds advanced after President-elect Joko Widodo met losing candidate Prabowo Subianto in their first public meeting since the July election.

The Jakarta Composite Index rallied 1.6 percent to close at 5,028.946 in Jakarta, the biggest increase since July 7. The rupiah strengthened 1.2 percent, also the most since July 7, to 12,108 per dollar, prices from local banks show. The yield on the 8.375 percent notes due March 2024 fell four basis points to 8.29 percent, according to the Inter Dealer Market Association.

Widodo, who will be inaugurated on Oct. 20, has pledged to cut fuel subsidies and boost economic growth to at least 7 percent a year. The coalition of parties that backed Prabowo in the presidential vote had some wins in recent weeks including selecting the parliamentary speaker from its own ranks, casting doubt on he president-elect’s ability to push through reforms.

“The shares gained after the meeting this morning between Widodo and Prabowo,” said John Teja, a director at PT Ciptadana Securities in Jakarta. “Investors took that as a signal that the political tensions between them have eased.”

PT Bank Rakyat Indonesia rose 4.7 percent, providing the biggest boost to the Jakarta gauge. PT Astra International, the largest company in the index, rose 3.2 percent and PT Unilever Indonesia added 3.3 percent. The Jakarta measure gained 1.3 percent since Oct. 10, a second weekly increase.

Forwards Surge

The rupiah has advanced 0.9 percent since Oct. 10, snapping an eight-week losing streak. One-month non-deliverable forwards traded offshore surged 1.7 percent, the most since Feb. 14, to 12,175 per dollar, data compiled by Bloomberg show. The contracts traded 0.5 percent weaker than the onshore rate.

Bank Indonesia set a fixing used to settle the rupiah forwards at 12,222 per dollar, compared with 12,207 yesterday and on Oct. 10. One-month implied volatility, a measure of expected swings used to price options, fell 38 basis points to 10.60 percent, data compiled by Bloomberg show.

“There seems to be some position adjustment before the weekend and before the inauguration,” said Tsutomu Soma, department manager of the fixed-income business unit at Rakuten Securities Inc. in Tokyo. “In the long term, the main scenario is the Fed is likely to start raising rates sometime next year and the dollar will continue to see appreciation pressure.”

Government bonds gained for a second week after investors submitted bids totaling 4.1 times the 8 trillion rupiah ($661 million) of notes offered at an Oct. 14 auction, the highest ratio in a year. That prompted the finance ministry to increase the sale size to 12 trillion rupiah, meaning 54 percent of the 24.8 trillion rupiah issuance target for this quarter has already been met.

“There will definitely be less bond supply in the weeks ahead,” said Herbie Mohede, a Jakarta-based fixed-income fund manager at PT Samuel Aset Manajemen, which oversees 3 trillion rupiah. “Investors are starting to buy with a view that yields will fall in the months ahead once Jokowi raises fuel prices.”

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