Indonesia’s stocks posted their biggest two-day loss in eight months on speculation other rating companies would follow Standard & Poor’s in cutting its outlook on the nation’s rating. Bond yields rose while the rupiah slid.
The Jakarta Composite Index dropped 1.4 percent at the close, its steepest decline since March 22. The two-day loss of 2.7 percent was the most since Aug. 30. PT Astra International, the largest company by market capitalization in Jakarta, slid 4.2 percent to its lowest close in five months. PT Bank Rakyat Indonesia, the second-largest lender by assets, recorded its steepest two-day slump since October 2011. S&P yesterday revised its outlook on Indonesia’s BB+ rating to stable from positive.
“With the market at an all-time high, people are wondering if this would be followed by Moody’s and Fitch. And this came as the Philippines got an upgrade.” Wilianto Ie, head of equities research at PT Nomura Indonesia, said by telephone from Jakarta. “The biggest risk is if the reversal in market sentiment happens to be too drastic and we start to see a sell-off in the bond market and the rupiah comes under pressure.”
Before the downgrade by S&P, the benchmark index had risen 17 percent to a record high and traded at 15 times 12-month projected earnings, according to data compiled by Bloomberg.
Astra International fell 4.2 percent to its lowest close since Dec. 4. Bank Rakyat Indonesia dropped 4.8 percent, while PT Telekomunikasi Indonesia, the largest telecommunication company, slid 4.2 percent.
The yield on the government’s 5.625 percent notes due May 2023 climbed six basis points to 5.58 percent at the close, the most since March 27, prices from the Inter Dealer Market Association show. The rupiah declined 0.1 percent to 9,735 per dollar, prices from local banks compiled by Bloomberg show.
Bank Indonesia’s Deputy Governor Perry Warjiyo said today the central bank has been intervening in the currency market from yesterday afternoon until this morning to signal that it’s taking steps to stabilize the rupiah. He also said S&P’s outlook cut would only affect the market temporarily.