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Coronavirus to affect stock market until contained: Analysts
In the red: An employee looks at an electronic board showing stock movements at the Indonesia Stock Exchange in 2015
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n the red: An employee looks at an electronic board showing stock movements at the Indonesia Stock Exchange in 2015. The local stock market continued a three-day decline on Tuesday as concerns grow over the potential economic impact of the quickly spreading coronavirus from China. (JP/Jerry Adiguna)
Negative sentiments stemming from China’s coronavirus outbreak are to continue infecting the local stock market for some time until global authorities manage to contain the spread of the deadly virus as investors flee to save haven assets, analysts are saying.
The main gauge of the Indonesia Stock Exchange (IDX), the Jakarta Composite Index, declined for the third day on Tuesday, down 0.36 percent to 6,111.18 after falling 1.78 percent on Monday and 0.08 percent on Friday as global jitters over the spreading virus reached the local bourse.
Foreign investors recorded almost Rp 470 billion (US$34.54 million) of net sell on Tuesday with stocks of diversified petrochemical giant PT Barito Pacific, privately owned Bank Central Asia and state-owned Bank Rakyat Indonesia becoming the index’s laggards.
On the day, Japan’s benchmark index, the Nikkei 225, fell 0.5 percent after plunging more than 2 percent in the previous trading session, while the broader Topix index dropped 0.6 percent. China’s Shanghai and Hong Kong stock markets were closed for public holidays.
“There is a growing concern that the virus outbreak will last for a long time,” BNI Sekuritas' head of equity research, Kim Kwie Sjamsudin, told The Jakarta Post on Monday, adding that the outbreak would likely continue to adversely affect the local stock market until the virus could be contained or new vaccines developed by the medical authorities.
"It will be hard to predict how long the index correction will happen because the level of uncertainty is still high,” he said.
While no positive case has yet been found in Indonesia, the 2019 novel coronavirus (2019-nCoV) virus had infected more than 4,600 people in various countries as of Tuesday afternoon with 106 fatalities on mainland China. The outbreak fueled concerns about the Chinese economy, the second largest in the world, which had already weakened in the last few years because of trade frictions with the United States.
China’s economic slowdown would spill over to other countries, including Indonesia. The East Asian country is Indonesia’s number one trading partner and among its biggest foreign investors.
Kim said the panic had caused investors to flock into safe haven assets such as gold.
Gold, a go-to asset in times of turmoil and uncertainty, seemed headed back toward $1,600 per ounce and the six-year peaks touched at the start of January, Agence France-Presse reported. Bullion prices were up slightly by 0.06 percent on Tuesday afternoon to $1,584 per troy ounce after surging 0.8 percent on Monday.
Researchers estimated that the new coronavirus would afflict at least tens of thousands of people and would last a minimum of several months.
"It is unclear how long the coronavirus will impact the country's stock market," Sucorinvest Asset Management executive chairman Jemmy Paul told the Post.
"The money market is the safest bet for now as a strengthened rupiah has been superior to gold," he said.
The rupiah's value against the US dollar, which has been hovering around its two-year high since early this month, weakened by 0.21 percent on Tuesday to 13,644 per dollar.
However, Jemmy said, the coronavirus jitters were not the only factor that caused the weak performance of the local bourse.
"Domestic investors are also selling their stocks not only because of the coronavirus but also to mitigate liquidity risks," he said. "This is an impact of the failures to pay out investors’ money in several cases, including Jiwasraya and several mutual funds."
The IDX halted last week the trading of several stocks implicated in alleged corruption at state-owned insurer PT Asuransi Jiwasraya, preventing investors with such stocks to cash in on their equities.
Separately on Tuesday, IDX president director Inarno Djajadi said the new coronavirus outbreak would not have a long-lasting effect on the country's stock market.
"It indeed affects stocks in the short-term but there has yet to be a global epidemic that will affect investment in the long-term," said Inarno.
Investment Coordinating Board (BKPM) head Bahlil Lahadalia also said the recent epidemic has yet to affect investment realizations, including investments from China. However, he expected a new investment pattern would emerge by February as a result of the outbreak.
"Hopefully, it won't affect Chinese investment realization in Indonesia," Bahlil said.
During January to September last year, Chinese direct investment in Indonesia amounted to $3.3 billion in 1,619 projects, BKPM data showed. China is Indonesia’s third largest foreign investor after Japan and Singapore.
