Indonesian share prices closed 3.1 percent lower on Wednesday on persistent fears that rising inflation may lead to further interest rate hikes, dealers said. They said fresh worries over the global economy sparked by an IMF report on the widening credit crisis also weighed on local shares.
The Jakarta Composite Index was down 69.68 points at 2,180.09. Volume was 3.91 billion shares valued at 5.9 trillion rupiah (643 million dollars). Decliners led gainers 183 to 23, with 44 stocks unchanged. The rupiah was trading at 9,205/9,215 to the dollar against 9,190/9,200 late Tuesday.
Valbury Asia Securities analyst Mastono Ali said the market feared a rate cut this year. "Investors are worried that rising inflation may force the central bank to raise its benchmark rate later this year," Ali said.
Analysts have said the central bank may be forced to hike the benchmark interest rate, currently at 8.0 percent, as early as May if inflation stays high this month. Ali said banking stocks extended their losses on concern that earnings may fall below expectations this year partly due to the decline in government treasury bond prices.
"Many banks hold a significant amount of government treasury bonds. The decline in treasury bond prices means that their income from these instruments would also decline," Ali said. Bank Mandiri lost 5.4 percent to 2,650 rupiah, Bank Central Asia dropped 2.7 percent to 2,750 and Bank Danamon lost 6.7 percent to 5,550. Coal miners gave up their early morning gains to end the session lower. Bumi Resources dropped 2.6 percent to 5,550, Bukit Asam fell 1.6 percent to 9,350 and Indo Tambangraya turned flat at 22,900.
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