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Shares rebound after Jokowi-Prabowo meeting
Indonesian financial markets bounced back Friday with the main share price index returning to the 5,000s level following a meeting between president-elect Joko âJokowiâ Widodo and former contender Prabowo Subianto in the July election
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ndonesian financial markets bounced back Friday with the main share price index returning to the 5,000s level following a meeting between president-elect Joko 'Jokowi' Widodo and former contender Prabowo Subianto in the July election.
The Jakarta Composite Index (JCI) ' the main benchmark of the Indonesia Stock Exchange (IDX) ' gained 1.6 percent to close at 5,028.94, the first time the index passed the 5,000 level since last Tuesday.
Friday's increase was the highest recorded since July.
The rupiah also strengthened 0.9 percent, the most since July 8, to 12,141, according to prices from local banks gathered by Bloomberg, while government bonds advanced and set for weekly gains.
Mandiri Sekuritas equity research head John Daniel Rachmat attributed the stock performance to a meeting held by Jokowi and Prabowo, their first since the July presidential election.
During the meeting, Prabowo ' whose Gerindra Party leads the Red-and-White Coalition ' said that he would support Jokowi's administration, an important political gesture indicating that the opposition parties had eased their pressure on the president-elect.
'It brought back investor confidence. They believe things will go smoothly, at least until year-end,' he said during a telephone interview.
The meeting with Prabowo followed a series of meetings held by Jokowi with chairs of opposition parties, including Aburizal Bakrie of Golkar Party.
He also previously met leaders of the House of Representatives and the People's Consultative Assembly (MPR), all of whom are from opposition parties.
There was growing concern that with the success of the opposition parties in securing all the leadership positions in the House and the MPR, Jokowi would be unable to secure enough support to carry out his economic programs.
All indices on the stock exchange ended in the green on Friday. The shares of several blue chips, including state-owned lender Bank Rakyat Indonesia (BBRI), private conglomerate Astra International (ASII) and consumer goods giant Unilever Indonesia (UNVR), were among the top gainers in Friday's trade.
According to John, the JCI index was expected to stay above the 5,000 level to year-end, supported by a string of expected positive developments.
'Jokowi will be inaugurated on Monday and he will announce his Cabinet soon after that. From what we have observed, the people who will fill the ministerial posts are acceptable to the market,' he added.
The realization of a planned hike in the subsidized fuel price in November would be more positive news to the market, John said. Mandiri Sekuritas sets its official JCI target at 5,550 to year-end.
Sucorinvest Central Gani analyst Isfhan Helmy said that Friday's result was a good start toward the realization of Jokowi's economic policies.
'We have seen Jokowi go on a political 'guerilla' during the past few days and that fosters investors' optimism that his policies can actually come to fruition,' he said.
However, he said that foreign investors would need more time to be assured, as shown by the latest net trading value. The IDX recorded a net sell of Rp 691.3 billion on Friday.
'Foreign investors are waiting for the Cabinet announcement, so it was domestic investors that drove the JCI higher,' he said.
A. Tony Prasetiantono, a Gadjah Mada University economist, said that investors' confidence level would continue to improve if Jokowi maintained the positive momentum, especially by establishing a professional Cabinet.
'The rupiah will continue to strengthen, to stay below the 12,000 level, and the JCI will return to its highest level of 5,200,' he added.
The yield on the 8.375 percent government bonds due March 2024 fell two basis points to 8.31 percent, according to Inter Dealer Market Association figures reported by Bloomberg.
The rate dropped eight basis points, or 0.08 percentage points, this week.
Bonds move in the opposite direction to prices, with lower yields indicating more expensive prices.
Meanwhile, share prices on other emerging markets also climbed, trimming their sixth weekly loss, as a rebound in oil prices boosted energy companies in China and Russia.
The MSCI Emerging Markets Index added 0.4 percent to 974.47 at 1:34 p.m. in London, paring this week's decline to 1.6 percent. The measure is poised for the longest stretch of weekly losses since June 2013 as investors pulled US$2.4 billion from developing-nation funds in the week that ended Oct. 15, according to a Citigroup Inc. note as reported by Bloomberg.
