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Stocks narrow losses as OJK prepares crisis measures
Indonesian stocks recorded narrow losses on Friday after plummeting more than 4 percent earlier in the day amid global fears of a coronavirus pandemic
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Indonesian stocks recorded narrow losses on Friday after plummeting more than 4 percent earlier in the day amid global fears of a coronavirus pandemic.
The Jakarta Composite Index (JCI), the main gauge of the Indonesia Stock Exchange (IDX), fell as much as 4.47 percent to 5,288.37, a level unseen since December 2016, during Friday’s intraday session before slowly rebounding to end the trading day at 5,452.7, 1.5 percent down from the previous close. It was an extension of its 2.69 percent loss the previous day, as spooked investors dumped stocks across Asia.
Foreign investors recorded net sales of Rp 17.21 billion (US$1.2 million) on Friday, taking the total net sales this year to Rp 4.72 trillion, IDX data shows.
“We’re not the worst. This is a global phenomenon caused by the extraordinary panic over the novel coronavirus,” IDX president director Inarno Djajadi told reporters in Jakarta on Friday. “We have tools [to prevent a sharp decrease] that we’ll use if necessary.”
COVID-19, which had infected more than 83,500 people worldwide and killed more than 2,800 as of Friday, has disrupted the business activities of the world’s economic giants, such as China, Japan and South Korea, and sent jitters through the United States, which has seen an increasing number of confirmed cases on its soil.
Inarno said his institution was working closely with the Financial Services Authority (OJK) to ramp up its crisis protocol and measures to prevent further steep declines in the stock market.
“Insya Allah [God willing], our situation will remain under control,” he said.
A 2012 IDX board of directors’ decree states that the bourse can halt stock trading in an emergency situation, such as a natural disaster, political emergency, technological and infrastructure disruptions and steep declines in the JCI.
The decree stipulates that if the index falls 10 percent, the bourse will halt trading for 30 minutes. If the decline continues to 15 percent after the first suspension, the IDX will stop trading for an entire session or longer with approval from the Indonesian Capital Market and Nonbank Financial Institutions Supervisory Agency, now the OJK.
OJK chairman Wimboh Santoso said his institution had prepared the protocol, saying it had several options to implement in such a situation.
“We can allow listed companies to buy back their shares without a prior shareholders meeting,” he said.
Indonesia is not the only market to have suffered dramatic drops in recent days. Wall Street’s main indexes plummeted more than 4 percent each on Thursday, sending a shockwave through Asian markets the following day.
Tokyo ended Friday trading with a 3.67 percent loss, while Shanghai dropped 3.71 percent, Hong Kong slipped 2.42 percent and Seoul fell 3.3 percent.
European stocks opened in the red with corrections of more than 3 percent.
“The disease has spread around the globe, prompting concerns this outbreak will disrupt the world economy," said Anugerah Mega Investama director Hans Kwee.
Indonesia has yet to record any confirmed COVID-19 cases but concerns are growing among investors as China is one of the country’s main trading partners, he added.
Bank Indonesia (BI) has pumped Rp 87 trillion into the domestic bond markets this month amid big sell-offs. As of Thursday, foreign investors had sold Rp 26.2 trillion worth of government debt papers throughout February, BI Governor Perry Warjiyo said on Friday.
The rupiah depreciated more than 2 percent to Rp 14,317 against the US dollar on Friday, its weakest level since August 2019.
Fitch Solutions projected the rupiah to hover at around Rp 14,207 per dollar this year, a downward revision from its previous projection of Rp 13,650, given the higher risks of a local coronavirus outbreak.
"The short-term drivers have turned negative due to the elevated risk of a global COVID-19 pandemic and local outbreak," it stated. "We believe the risks of local outbreaks are high, which, once reported, will exert significant downside pressure." (prm)
