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Indonesian market: Energy price cuts lift shares
JAKARTA — The Indonesian government’s decision to cut key energy prices in its latest economic stimulus package lifted investor sentiment on Thursday
The Jakarta Composite Index rose to a high of 4537.25 on early trading, closing X% higher than the previous day’s close. The index has gained more XX% since the end of last week, rebounding from a 19% decline for the year. The rupiah also strengthened to around 13,860 against the dollar.
“The confidence in the market and economy has improved,” said Sebastian Tobing, head of research at local brokerage Trimegah Securities. “It seems like the government has finally realized that there is a level of urgency.”
On Wednesday, the government announced the third round of economic stimulus packages to help businesses tackle a sluggish economy. The latest one focused on small cuts in energy price such as diesel fuel, jet fuel, electricity and gas. New prices will be effective in different stages throughout January.
Shares of companies that are expected to benefit from lower energy prices were lifted. National flag carrier Garuda Indonesia surged more than 10% on expectations of lower fuel costs, which accounts for about a third of total cost. Astra International, the country’s largest automotive company, and Blue Bird, the largest taxi operator, gained 4% and 6% respectively.
On the other hand, state-owned gas distributor Perusahaan Gas Negara fell by 1% on concerns over lower margins. Pertamina, the state-owned oil company, is not listed.
External factors have played a big role in Indonesia’s volatile stock and currency markets. The surge in stocks and rupiah has also been driven by a reversal of capital outflows on rising expectations that the U.S. Federal Reserve will not raise interest rates for the rest of the year. “There could be some profit taking, but investors are more comfortable with the downside risk,” Tobing said.
