Indonesia’s stocks and currency declined after former general Prabowo Subianto filed an appeal contesting an official count declaring he lost this month’s presidential election.
The iShares MSCI Indonesia ETF slid 1.1 percent to $28.89 in New York in its fourth day of declines. Rupiah one-month non-deliverable forwards traded offshore fell 0.2 percent to 11,638 per dollar, the lowest in a week. The Jakarta Composite Index (JCI) slipped 0.2 percent to 5,088.80 before the court filing was announced.
Prabowo submitted a suit to the Constitutional Court disputing the validity of about 21.9 million ballots after Jakarta Governor Joko Widodo won by 8.4 million votes, Prabowo’s lawyer said yesterday. If they choose to accept the case, the court’s nine justices have until Aug. 24 to deliver a judgment. Failure to deliver a clear result may risk destabilizing Asia’s fifth-largest economy, which is still emerging from decades of rule by dictator Suharto, who was once Prabowo’s father-in-law.
“Clearly, the Indonesian stock market has been negatively impacted by the uncertainty of the election, and it could decline further if a resolution isn’t reached fairly quickly,” Timothy Ghriskey, chief investment officer at New York-based Solaris Asset Management LLC, said in a phone interview yesterday. “Normally that would eventually provide a buying opportunity at least for a snap back but clearly the timing is uncertain. The uncertainty is disconcerting.”
There was concern about the voting process in at least 59,000 of the country’s some 480,000 polling booths, Didi Supriyanto, one of Prabowo’s lawyers, said on July 23. The court itself has a history of graft, with former chief justice Akil Mochtar serving a life sentence after being convicted in June.
The benchmark stock index jumped to a 13-month high on July 10 as exit polls flagged a Widodo victory, then slumped as much as 2.2 percent on July 22 after Prabowo withdrew his vote-count witnesses.
Widodo’s election win will most likely be ratified by the court and investors should focus on his cabinet selections and proposals for political and economic reforms, according to John Krey, an analyst at S&P Investment Advisory Services in New York.
“We still recommend the retention of a market-neutral exposure to Indonesian equities pending details of Joko Widodo’s policy agenda and the reaction of the legislature to his proposals,” Krey said in an e-mail yesterday. He needs to show a “detailed policy agenda for which the voting public can hold him accountable.”