Jakarta stocks bounced back on Thursday to end at a new 6-1/2 year high, after a sharp correction a day earlier, driven by fresh liquidity inflows, falling interest rates and gains for major banks.
Dealers predicted stocks could gain further and saw new resistance for the index at 740-742 points.
The highest closing level ever for the Jakarta index was 740.83 points in July 1997. It has never returned to that level.
On Thursday, the composite index jumped 3.02 percent to close at 730.82 points, its highest level in 6-1/2 years. Turnover was heavy at 1.5 trillion rupiah ($180 million).
Gainers led decliners 114 to 38, while 63 issues ended unchanged.
"Foreign investors continued to buy into the market. The fall in interest rates was a positive factor," said Edhi Santoso Widjojo, head of research at Ciptadana Sekuritas.
In their first weekly auction in 2004 on Wednesday, the central bank's benchmark SBI papers (SBI) fell further and more cuts were seen due to the stronger rupiah, benign inflation and ample liquidity.
The one-month SBI rates fell seven basis points to 8.24 percent, while the rate on the three-month SBI dropped 19 basis points to 8.15 percent.
Among the biggest gainers on Thursday were auto giant PT Astra International Tbk, jumping 8.4 percent to close at 5,800 rupiah, a fresh record high.
Dealers said the shares were boosted by large buying by BNP Paribas Peregrine.
Banking stocks were active, with gains helped by interest rate falls.
The country's top bank, PT Bank Mandiri Tbk, jumped 9.76 percent to 1,125 rupiah, a new all time high.
The fourth-largest bank, PT Bank Rakyat Indonesia Tbk, rose 7.69 percent to 1,400 rupiah, a fresh record high.
"The low inflation and interest rate environment has led to the brighter outlook in the banking sector," said Sally Leonardo, chief dealer at Kim Eng Securities.
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