Indonesia’s benchmark stock index rallied to a six-month high and the rupiah rebounded after the nation’s economic growth beat analyst estimates, as the government stepped up measures to boost state spending and lure foreign investment.
The Jakarta Composite Index rose 2.3 percent to 4,774.68 at the midday break, set for the highest close since Aug. 6 last year, as PT Bank Mandiri, the largest lender by assets, paced gains.
The rupiah reversed earlier losses. The yield on government bonds due September 2026 fell seven basis points to 8.04 percent, the lowest level since May last year, according to Inter Dealer Market Association.
Indonesia’s GDP grew 5.04 percent in the final three months of last year, a government report showed yesterday, exceeding all estimates in a Bloomberg News survey, as Indonesian President Joko Widodo accelerated efforts to revitalize Southeast Asia’s biggest economy.
Consumer stocks, banks and builders would spearhead more gains in the nation’s benchmark stock index, the best performer in Asia so far this year, as they benefit from economic expansion, according to a report by PT Mandiri Manajemen Investasi.
“Consumer and infrastructure-related stocks will lead the rally this year. They will come ahead of banks and property stocks, which will benefit from falling interest rates,” Mandiri Manajemen chief investment officer Priyo Santoso said by telephone from Jakarta. “The numbers confirmed our earlier optimism on the economic recovery. Under an optimistic scenario, the Jakarta Composite could gain to 5,200 or 5,300 this year.”
Policymakers cut interest rates last month for the first time in 11 months, and have signaled further easing is possible this year.
Since taking office in October 2014, the president, known as Jokowi, has sought to boost foreign investment, infrastructure spending and implement bureaucratic reforms to rejuvenate an economy hit by sliding commodity prices.
Government spending rose 7.3 percent in the fourth quarter from a year earlier and surged 41.3 percent from the previous three months. Investment rose 6.9 percent year-on-year.
Bank Mandiri shares jumped 6.5 percent to lead a gauge of finance stocks to the highest level since August last year and the biggest gainer among nine industry groups. PT Telekomunikasi Indonesia shares rose 4.6 percent.
Better-than-expected growth in the economy could provide stability for the rupiah and provide more room for Bank Indonesia to cut interest rates further, PT Ciptadana Sekuritas analyst Syaiful Adrian said by telephone.
The economic recovery might also help reduce bad debt problems in the banking industry, he added.
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