Jakarta Stocks Fall Most in Six Weeks on Rupiah, Credit Outlook

Indonesian stocks declined the most in six weeks as the rupiah fell to its lowest level in four years and amid concerns the central bank’s new reserve requirement rules may slow lending.

The Jakarta Composite Index (JCI) fell 1.8 percent to 4,601.48 as of 10:59 a.m. Jakarta time, heading for the steepest decline since July 8. PT Bank Rakyat Indonesia, the country’s second-largest lender by assets, fell 4.2 percent and PT Bank Mandiri declined 2.3 percent. The Jakarta Stock Exchange Finance index fell 2.2 percent, the biggest drag among nine industry groups.

Bank Indonesia yesterday said it will increase the secondary reserve requirement for lenders to 4 percent from 2.5 percent and said banks with a loan-to-deposit ratio of outside a range of 78 percent to 92 percent would have to put additional reserves at the central bank. The range was narrowed from 78 percent to 100 percent previously.

“This could result in slower loan growth,” Hadi Soegiharto, analyst at PT CIMB Securities Indonesia, wrote in a report yesterday. “The growth of the Indonesian banking sector remains at risk, particularly from further tightening.”

The central bank left its benchmark interest rate unchanged at 6.50 percent at a policy meeting yesterday.

The rupiah fell 0.2 percent to 10,373 per dollar, its weakest level since June 2009, after Indonesia’s foreign reserves dropped to the lowest since 2010 and before data today that may show the current-account deficit widened to a record.

“By keeping the benchmark rate unchanged, the market is reading that as a signal that the central bank is prioritizing growth,” John Rachmat, head of equity research at PT Mandiri Sekuritas, said by phone today. “That put a lot of pressure on the currency and probably would put more pressure on bonds and the equities market.”

To contact the reporter on this story: Harry Suhartono in Jakarta at hsuhartono@bloomberg.net

To contact the editor responsible for this story: Michael Patterson at mpatterson10@bloomberg.net

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