Indonesian share prices closed up 0.7 percent to reach a new record high on Tuesday, driven by buyer anticipation of an interest rate cut by the United States Federal Reserve, dealers said. The Tuesday night decision is expected to see the central bank lower its key rate by 25 basis points.
A reduction bigger than that could spark a further rally in Indonesian shares tomorrow, they said. Key gainers included coal giant Bumi Resources, which continued to attract buyers on stronger coal prices, and the country's sixth largest bank, Bank Internasional Indonesia (BII).
BII was the highest-traded stock following news that Singapore's Temasek Holdings had raised its stake in Sorak Financial, which owns slightly more than 56 percent of BII, to 75 percent from 50 percent. The Jakarta composite index closed up 20.70 points at 2,810.96, surpassing the previous all-time high of 2,795.40 set on December 6, on volume of 4.57 billion shares worth 4.76 trillion rupiah (513.37 million dollars).
Gainers lead decliners 125 to 57, while 63 stocks were unchanged. The rupiah was trading at 9,275/9,280 to the dollar against 9,265/9,270 late Monday. "What investors really want to know tomorrow (Wednesday) is whether or not the Fed will cut the rate by more than 25 basis points," said Darmawan Halim, an analyst at Amcapital Securities.
Even with the index's record-breaking run, some investors were biding their time until after the Federal Reserve makes its decision, he said. Bumi Resources rose 150 rupiah to 6,050 while rival Bukit Asam added 200 to 12,100. BII gained 15 to 290. "The question is what Temasek is going to do with its stake now," Halim said.
Temasek, which also has a 59.1 percent stake in Indonesia's fifth largest bank, Bank Danamon, has until the end of this month to decide whether it will merge Danamon and BII or divest its stake in either bank to comply with regulations that disallow holding controlling stakes in more than one bank.
The Singaporean firm could also set up a holding company for the two banks, Halim said. Among other gainers, Berlian Laju Tanker, the world's third largest chemical shipping operator, gained 125 to 2,600 after UBS raised its target price for the stock by 28 percent. The revision was to factor in the expected consolidation of recently acquired Chembulk Tankers, UBS said. Bucking the trend, auto giant Astra International lost 750 to 27,750 on profit-taking.
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