(Bloomberg) -- Indonesian stocks jumped by the most in three weeks after higher-than-expected dividend payouts by the biggest state-owned banks helped pull investors back to a market riven by concerns over the president’s policies.
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The benchmark Jakarta Composite Index gained as much as 3.8% Wednesday. PT Bank Negara Indonesia Persero, PT Bank Mandiri Persero and PT Bank Rakyat Indonesia Persero, popular with investors for their profitability, were among the top contributors to the gauge’s rise.
The dividend payouts, which total 109.2 trillion rupiah ($6.6 billion), add to measures by the central bank and a newly-created wealth fund to reassure investors worried about President Prabowo Subianto’s populist policies and steps to take control of state companies. The nation’s markets have underperformed peers with stocks down almost 20% from a September high while its currency hit the lowest since the Asian financial crisis.
“With the currency nearing historical lows and the economic growth outlook remaining weak, something needs to be done to attract investors to invest, such as improvement in corporate governance coupled with an increase in dividend payout,” said Ken Wong, Asian equity portfolio specialist at Eastspring Investments.
Bank Indonesia has had to intervene to support the rupiah, which has dropped almost 3% against the dollar this year. Meanwhile, Danantara, the new sovereign wealth fund started by Prabowo, said it has appointed two former presidents and Bridgewater Associates founder Ray Dalio as its advisors to reassure investors.
“The appointment of credible management team at Danantara (the holding company of Mandiri) should alleviate risks for Mandiri to do national service,” UBS Group AG analysts including Joshua Tanja wrote in a note dated Wednesday.
Earlier this month, Danantara, which reports directly to Prabowo, started taking control of state-owned companies including the three banks. Their dividends in the past would have been paid to the government, which recently reported an unexpected fiscal deficit. The president’s policy steps since taking office in October may push the budget deficit closer to its legal limit of 3% of gross domestic product.
Bank Mandiri shareholders approved on Tuesday plans that offer a 78% dividend payout ratio, the highest ever, according to Morgan Stanley analyst Selvie Jusman. PT Bank Negara Indonesia Persero allowed a dividend with a 65% payout ratio, versus last year’s 50%, while Bank Rakyat’s stood at 86%.
