Indonesia stocks jump as Prabowo win removes election risk
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Defence Minister Prabowo Subianto (left), Indonesia’s presidential candidate, and his running mate Gibran Rakabuming Raka, son of President Joko Widodo.
PHOTO: BLOOMBERG
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JAKARTA - Indonesian stocks jumped in early trading on Feb 15 as traders bet on policy continuity after Defence Minister Prabowo Subianto declared victory in the country’s presidential election.
The Jakarta Composite Index rose as much as 2.2 per cent, the most since May 2022, after the former general secured nearly 60 per cent of support in quick counts done by private pollsters. It closed 1.3 per cent higher at 7,303.28 on Feb 15.
The iShares MSCI Indonesia ETF rallied 2.4 per cent in the United States on Feb 14, the biggest one-day gain in three months.
A swift victory for Mr Prabowo is likely to remove the uncertainty that would arise from a prolonged election, and may draw more foreign inflows into Indonesian equities and bonds. The winning candidate and his running mate Gibran Rakabuming Raka – son of President Joko Widodo – have pledged to transform Indonesia into a high-income economy by 2045 by building infrastructure and tapping more of Indonesia’s vast natural resources.
“Given that Prabowo-Gibran had largely campaigned on a platform of policy continuity, we believe this will bring the focus of investors back to the fundamentals,” Morgan Stanley analysts including Derrick Kam and Selvie Jusman wrote in a report. “We see growth momentum improving, led by capex, inflation staying within the central bank’s target range, and the potential for rate cuts by Bank Indonesia from June onwards.”
The rupiah gained 0.2 per cent to 15,565 per US dollar at the open on Feb 15, after onshore markets were closed the day before for the presidential vote.
Citigroup expects Indonesian equities to rally following the election outcome and maintained its forecast for the benchmark index to climb to 7,750 by June, according to a report. “Post market euphoria, the market should behave on the sidelines until cabinet announcements are made or policy reforms are implemented,” Citi analysts including Ferry Wong and Ryan Davis wrote in the note.
“This first round victory will bring near-term relief to markets,” OCBC Bank economist Lavanya Venkateswaran wrote in a note. “Beyond this initial reaction, the Prabowo-Gibran pair will need to do more to convince market participants that policy continuity, specifically economic priorities, and credible policy formulation, will be adopted during their tenure.” BLOOMBERG
