JAKARTA: Indonesian stocks closed at a record high and government bonds advanced after the central bank unexpectedly cut borrowing costs. The rupiah fell.
The Jakarta Composite Index climbed 1 percent on Wednesday to 5,390.449, taking its advance this year to 3.1 percent. The benchmark interest rate was lowered to 7.5 percent from 7.75 percent after markets closed Tuesday, a move not predicted by any of the 20 economists surveyed by Bloomberg.
The central bank raised the rate by 25 basis points in November following an increase in gasoline prices. Retail rates have since declined in line with global oil prices after Indonesia all but eliminated subsidies from January.
“The rate cut was unexpected and it benefits interest-rate sensitive stocks such as banks, property and eventually consumer-discretionary companies,” said Alvin Pattisahusiwa, director of investment at PT Manulife Aset Manajemen Indonesia in Jakarta. “Now the fuel price has been mostly rolled back to the pre-November hike, it seems a sensible move to cut back the interest rate.”
