T

he local stock market index slumped deep on Tuesday after five consecutive days of gains as new data on China'€™s economy sent shock waves to emerging markets.

Price barometer the Jakarta Composite Index (JCI) lost 2.15 percent to end the day at 4,412.46, leading the declines in Southeast Asian price indices, while other benchmarks in the wider Asia region '€” including those of Japan and China '€” also slipped slightly above 2 percent.

The rupiah, meanwhile, slipped 0.2 percent to 14,097 against the US dollar.

The decline recorded by the JCI during the day ended the gains made during the five consecutive days.

The JCI rose 8.3 percent in the five days before Tuesday'€™s slump, as foreign investors started to buy after nearly a month of selling sprees, which put the index at this year'€™s low of 4,163 on Aug. 24, or 20 percent lower than its position in early January.

The market rout was triggered by gloomy domestic economic growth and global factors that included China'€™s currency devaluation and the US Federal Reserves'€™ possible interest hike this month.

China'€™s new data, according to NH Korindo head of research Reza Priyambada, once again played a big part in hauling emerging markets, while the easing inflation rate announced by the Central Statistics Agency (BPS) failed to support the weak market.

'€œThe first week of the month is usually the days when economic data is announced, and unfortunately global data, especially China'€™s, does not satisfy investors,'€ he said.

The Chinese factory gauge fell to the lowest reading in three years as five interest-rate cuts since November failed to revive old growth drivers weighed by overcapacity and sliding prices, said Bloomberg.

According to Bloomberg, the onshore yuan weakened 2.6 percent in August, the most in over two decades, as China devalued the currency and introduced a more market-driven method of setting its daily reference rate to save its sagging exports.

As a weaker yuan is a threat to exporters from Asian nations that compete with Chinese counterparts in international markets, the move triggered currency wars. For those with tight trade ties with China, including Indonesia, the devaluation was feared to hurt exports as prices of imported goods in the East Asian country might balloon.

Meanwhile, Reza said that Indonesia'€™s inflation data '€” out on Tuesday '€” fell short of sending a positive message. The inflation rate in August, which stood at 0.39 percent, was the lowest August inflation rate in the last five years.

'€œLower inflation should have been good news but instead it serves more like a confirmation for investors that Indonesians'€™ purchasing power is weakening, thus affecting prices,'€ he explained.

Lanjar Nafi from Reliance Securities agreed that China'€™s manufacturing data was behind the Tuesday decline, adding that investors took the momentum as the right time to unwind their gains after the index recorded a significant increase in the past few days.

However, he added that foreign net sell might start to recede in September as capital outflow had been extensive through the year, with the probability of foreign investors starting purchasing this month to revamp their portfolios. Foreign net sell hit Rp 6.18 trillion (US$439 million) year-to-date, according to Indonesia Stock Exchange (IDX) data, and on Tuesday foreign investors recorded Rp 232.7 billion of net sell.

Reza also said that while the market was expected to remain volatile, he did not expect it to decline deeper than on Aug. 24, saying that August was usually the lowest season for the stock market.