Indonesian share prices closed 0.87 percent lower on Thursday on follow-through selling mostly in the banks amid persistent concerns the central bank will continue to hike interest rates to control inflation, dealers said.
The benchmark interest rate of one-month Bank Indonesia Certificates (SBI) rose 125 basis points to 12.25 percent at Wednesday's auction as the central bank's response to soaring inflation in October.
The Jakarta Stock Exchange composite index lost 9.124 points at 1,043.697 on volume of 801.37 million shares worth 1.01 trillion rupiah (971.15 million dollars. Declines led advances 70 to 31, while 64 stocks were unchanged.
The rupiah was at 9,970/9,980 to the dollar compared to Wednesday's 9,940/9,950.
"I think the selling pressure in the past two days shows that investors are uncertain about the interest rate direction as to whether the central bank will opt for a negative real interest rate, as preferred by the government," Edwin Sebayang, an analyst with Evergreen Capital said.
He said despite recent rapid increases, the current interest rate of 12.25 percent is still about five percentage points below the October year-on-year inflation figure of 17.89 percent.
Sebayang said the government may feel certain that the rupiah could stabilise without the help of further interest rate hikes even with the real interest rate still being negative.
Bank Central Asia was down 50 rupiah at 3,000, Bank Danamon was down 175 to 3,675, Bank Internasional Indonesia was down 5.0 at 135, Bank Rakyat Indonesia was down 75 at 2,375 while Bank Permata was down 10 at 510.
Bank Panin was down five at 350 while Bank Mandiri was flat at 1,310.
Telkom was flat at 4,950, Indosat was up 25 at 5,000, Gudang Garam was unchanged at 10,400 and Astra International was down 250 at 8,800.