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Indonesian rupiah gains, index recovers after bomb

Indonesia's benchmark stock index had its biggest gain in more than three weeks and the rupiah rallied as the government moved to restore investor confidence after a bombing in Jakarta yesterday.

A central bank official called a decline in the currency yesterday "temporary" and indicated Indonesia may buy the rupiah.

The government said it will announce new security measures today, as it tries to assure investors after the blast at Jakarta's JW Marriott hotel claimed at least 14 lives.

"The government is handling the situation quite well, so stocks are recovering," said Li Ming Suryaputra, who helps invest the equivalent of US$750 million at PT Manulife Asset Management in Jakarta.

It'll take signs of growth to boost stocks further, she said.

Indonesian policy makers are already relying on interest -- rate cuts to boost local lending and consumer spending because terrorist attacks and separatist campaigns have deterred investment from overseas. IDEA Global reiterated its forecast for the economy to expand by 3.5 percent to 4 percent, saying it could grow at twice that level if not for the lost foreign investment.

"It's unlikely that this incident alone will cause a major exodus," said Tay Soo How, who helps oversee US$493 billion globally at Citigroup Asset Management in Singapore. "We're still bullish" on Asia.

The rupiah's decline is "temporary," said Anwar Nasution, senior deputy governor of the central bank.

"We have ample reserves. That gives us enough ability to intervene" to buy the currency, he said.

Indonesia's central bank will "probably be in again" to counter losses in the rupiah, said Chris Melendez, president of Tempest Asset Management, a hedge fund in Irvine, California.

For stock investors betting on gains, yesterday's decline presents a buying opportunity.

"Some investors are hunting for stocks that fell significantly yesterday," said Achmad Amir, a Jakarta-based analyst at DBS Vickers Securities.

Amir is recommending investors buy stocks including PT Bank Mandiri, the country's largest lender by assets, and PT Tempo Scan Pasific, an Indonesian drugmaker.
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