Indonesia election: Stocks and rupiah perk up on news of Jokowi victory

The rupiah traded to a two-month high against the US dollar at one point on April 18.
The rupiah traded to a two-month high against the US dollar at one point on April 18.PHOTO: REUTERS

JAKARTA • Indonesian stocks and the rupiah jumped after unofficial results showed Mr Joko Widodo defeating Mr Prabowo Subianto by a comfortable margin, and set for his second term as president of the world's third-largest democracy.

Seven top private polling agencies had Mr Joko, popularly known as Jokowi, ahead of Mr Prabowo by at least seven percentage points with about 99 per cent of the vote counted.

"It's time to brush aside tail risk concerns and buy Indonesian equities," Morgan Stanley analysts Sean Gardiner and Aarti Shah said in a report on Wednesday.

There is potential for further interest-rate cuts and a return of private sector confidence and reform, they said.

Foreign funds, which have been net sellers of Indonesian equities in the past two years, have pumped in US$961 million (S$1.3 billion) this year, in addition to channelling US$3.8 billion into the country's sovereign bonds, according to data compiled by Bloomberg.

When it comes to stocks, banks and construction companies may gain more than others as the incumbent is likely to carry on the US$350 billion infrastructure building boom that became a highlight of his first term, said Mr Jeffrosenberg Tan, strategist at Sinarmas Sekuritas.

Mr Joko's re-election may guarantee policy continuity and ensure continued flow of foreign funds, according to Mr Tan. "Equities market is expected to gain in the medium term as a landslide win leaves no room for dispute," he said.

 
 
 

After a brief surge to 2.4 per cent at the opening of trading yesterday, Indonesian stocks pared the rally to 0.4 per cent at closing.

The iShares MSCI Indonesia exchange-traded fund closed 1.9 per cent higher on Wednesday, reaching its highest since Feb 8.

The rupiah traded to a two-month high against the US dollar at one point yesterday. Some expect the rupiah to strengthen further and for more inflows into the debt market.

"Assuming the final result confirms a Jokowi win, I expect to see more capital inflows into local debt and further rupiah strength," said senior portfolio manager for emerging-market debt Tay Ek Pon at BNP Paribas Asset Management.

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A version of this article appeared in the print edition of The Straits Times on April 19, 2019, with the headline 'Stocks and rupiah perk up on news of Jokowi victory'. Print Edition | Subscribe