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Stocks, rupiah remain under heavy selling pressure
Selling pressure continued on the Indonesian Stock Exchange (IDX) on Thursday as investors sold their stocks amid fears that the Greek debt crisis will affect the recovery of the world economy
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elling pressure continued on the Indonesian Stock Exchange (IDX) on Thursday as investors sold their stocks amid fears that the Greek debt crisis will affect the recovery of the world economy.
The Jakarta Composite Index plunged almost 3 percent, much higher than the fall in regional stock markets, after the opening of the afternoon season.
Local investors are worried that the replacement of Finance Minister Sri Mulyani Indrawati, who
will leave her office in June, would not be capable in the job, analysts said.
The selling pressure, however, eased before the closing, as shares in European markets began gaining ground. The JCI index closed 1.25 percent lower at 2,810.62.
The rupiah also continued its decline Thursday and the yield of the benchmark 10-year government bond jumped the most in a year mostly due to the negative sentiment after Sri Mulyani’s move to the World Bank.
The rupiah dropped 1 percent to Rp 9,188 per US dollar at 4:40 p.m. Thursday in Jakarta, Bloomberg reported.
The Jakarta Composite Index fell for a fourth day, sliding 1.3 percent.
The yield of the 11-percent bond maturing in 2020 rose 50 basis points, the biggest increase since March 2009, to 9.27 percent.
“Domestic factors have played a big role. The market still waits for Mulyani’s replacement,” said Destry Damayanti, chief economist of Mandiri Sekuritas.
She said the market would still react negatively until hearing the news of a replacement for Mulyani, a highly respectable figure among investors.
Mulyani has been appointed as a World Bank managing director, the second-highest position at the bank, just under President Robert Zoellick.
President Susilo Bambang Yudhoyono said her move was a “big loss”.
Anton Gunawan, chief economist of Bank Danamon, said a global factor also played a role in the negative market sentiment.
But a short-term impact will allegedly result from Mulyani’s move, in addition to the overpricing of some market assets.
“It will gradually change because of a trigger, such as Mulyani’s move,” he said. “I see this as a normalization [of prices].”
Anton said the market wanted a “strong” figure who could manage prudent fiscal policies and continue the bureaucratic reform.
Acting Bank Indonesia Governor Darmin Nasution is seen as a stronger candidate to replace Mulyani than Anggito Abimanyu, head of the Finance Ministry’s fiscal policy office.
“The market needs a tough person ... who will be accepted by the House of Representatives,” he said.
The government plans to delay some major bond issuance due to uncertainty regarding who will replace the respectable minister in a bid to secure a long-term bond strategy, said Rahmat Waluyanto, director general of debt management.
“We will change strategies. We will revisit our schedule. In the current situation, we will not make long-term strategies.
“There are many factors we need to address and we should not make hasty decisions,” he said.
The government will delay the samurai bond issuance in Japan to the second half this year instead of initially this month, he added.
All stakeholders and investors consider Mulyani as a reputable figure with high integrity and capability in fiscal management, said Rahmat.
