T

he share prices of several state-controlled companies rallied on Wednesday after the House of Representatives approved the government'€™s proposal to give them additional capital to support future growth.

Shares of state construction firms PT Waskita Karya (WSKT) and PT Adhi Karya (ADHI) rose 2.27 percent and 0.86 percent to Rp 1,800 and Rp 3,500, respectively after the legislators approved capital injections of Rp 3.5 trillion (US$272.7 million) and Rp 1.4 trillion, each.

The share prices of state-run steel producer PT Krakatau Steel (KRAS) and Aneka Tambang (ANTM) also rallied with substantial gains of 3.2 percent and 3.38 percent to Rp 480 and Rp 1,070, respectively, as investors showed support for the capital injection plan.

During a meeting late on Tuesday, the House'€™s Commission VI over seeing state-owned companies approved a non-cash capital injection worth Rp 956 billion to KRAS. ANTM gets additional capital of Rp 3.5 trillion, although it is just half of the Rp 7 trillion proposed by the government.

'€œI think investors reacted positively to the announcement [even though its not yet final]. The stimulus, if it materializes, will also help concerned firms'€™ share prices rebound,'€ said Woori Korindo Securities Indonesia head of research Reza Priyambada.

Adhi plans to carry out around Rp 2.7 trillion in rights issues if its stimulus proposal is disbursed this year.

Universal Broker research head Satrio Utomo said the real market response would be tomorrow (Thursday) as people would begin to judge the implication of the capital stimulus to their future growth.

The market will wait for the final official decision on the stimulus or capital injection for state enterprises, locally known as PMN, he said.

The State-Owned Enterprises Ministry and House Commission VI agreed late Tuesday to allocate a total of Rp 37.3 trillion in stimulus funds to 27 state enterprises, including the four publicly listed companies.

The figure was smaller compared to figures previously proposed by the House'€™s budget committee of around Rp 40.7 trillion and the ministry'€™s initial proposal of Rp 48 trillion for 35 state companies.

The current figure for stimulus funds, however, is not final yet, since it will still be discussed with the House commission overseeing the budget and the House plenary meeting.

While proposed capital injections for most construction and mining firms were approved by Commission VI, capital injection for publicly listed state lender Bank Mandiri was rejected.

'€œMandiri'€™s proposal was not agreed to because the commission sees this year'€™s main priorities as infrastructure, food and microcredit,'€ said State-Owned Enterprises Minister Rini Soemarno.

She went on to say that following both the proposed stimulus cuts by Commission VI and also the reduction in the number of recipients, she would discuss with the Finance Ministry and the House'€™s budget committee the possibility of including state electricity company PLN and state-run guarantors Jamkrindo and Askrindo.

The government'€™s plan to inject capital into several state-owned firms had hit a rough patch as the plan came under heavy scrutiny at the House.

In previous meetings, lawmakers at the House'€™s Commission XI, which oversees finance and development planning, opposed the plan. They mostly questioned the magnitude of the PMN.

Maruarar Sirait, an Indonesian Democratic Party of Struggle (PDI-P) lawmaker, criticized the lack of clear economic targets from the capital injection plan.

'€œWith such a large amount of money, how much income and tax revenues will be received? How many new jobs will be created? How long will it take for us to see all the results? Such questions are not yet answered,'€ he said.

Another lawmaker, Rooslynda Marpaung of the Democratic Party, questioned the urgency of the capital injection as there was no clear correlation between the fund disbursement and a potential decline in poverty rates.