26/9/2011 (Jakarta Globe) - Local investors saved the day on Friday, a day after Indonesia’s benchmark stock index posted its biggest decline in three years.

The Jakarta Composite Index rose 57.20 points, or 1.7 percent, to 3,426.35, rebounding from an eight-month low Thursday. About 4.55 billion shares valued at Rp 5.39 trillion changed hands. Gainers beat decliners by 134 to 106.

Local investors bought Rp 603 billion ($69 million) more in shares than they sold on Friday. Investors in Indonesia may have deemed Thursday’s 8.9 percent drop as excessive relative to profit potential for stocks this year. The benchmark trades at 13 times historical earnings, down from weekly average of 14 according to Indonesia Stock Exchange data.

The JCI was the only major index to rise in the region, after leading declines on Thursday. The Hang Seng Index in Hong Kong lost 1.4 percent, while South Korea’s Kospi index plunged 5.7 percent, extending Thursday’s 2.9 percent side.

“Local investors are taking advantage of lower stock prices to accumulate selected stocks,” said Pardomuan Sihombing, head researcher at Recapital Securities in Jakarta. “That boosted the market today [Friday].”

He said that foreign investors — who accounted for 61 percent of total trading — overreacted on Thursday, causing the JCI to plunge without considering Indonesia’s fundamentals, such as its macro economic indicators and corporate performance.

Inflation remains within the central bank’s range of 4 percent to 6 percent this year, and Bank Indonesia is likely to maintain its key interest rate at least until the end of the year. Economic growth is forecast by the government at 6.5 percent this year, after a 6.1 percent expansion in 2010.

Some analysts are recommending investors invest in defensive and domestic-market oriented stocks to minimize the risk of a global economic slowdown.

“Stocks like banking, telecommunication infrastructure and consumer goods are preferable at this condition,” Pardomuan said, adding that the company’s products and services are included in daily needs, thus minimizing the impact of the global economic slow-down in their performances.

Telekomunikasi Indonesia, the nation’s largest listed telecommunication provider, gained 4.4 percent to Rp 7,200. Indosat, the second-largest cellular service provider, gained 2.8 percent to Rp 5,550.

Unilever Indonesia, the largest producer of personal and home care products, jumped 2.3 percent to Rp 15,350. Indofood Sukses Makmur, the largest listed food manufacturer, gained 5.8 percent to Rp 4,600.

Jasa Marga, a state-controlled toll road builder and operator, gained 0.7 percent to Rp 3,600. Jasa Marga gained approval from regulators to raise toll fees on the Surabaya-Gempol toll road. The fee increase will start Sept 28, along with the increase applied on all other toll roads.

Meanwhile, most commodity-based stocks dropped on concerns of declining demand amid slowing growth in western economies, namely in Europe and the United States. Astra Agro Lestari, the largest listed crude palm oil producer, fell 1 percent to Rp 20,750 as palm oil futures dropped by 0.6 percent in Bursa Malaysia.

Aneka Tambang, the largest listed gold miner, dropped 2.5 percent to Rp 1,580 after gold futures declined 2.3 percent on Friday.

The rupiah rose 2.8 percent to 8,735 against the dollar as the central bank intervened in the foreign exchange market.