The Jakarta Composite Index fell the most in a month, erasing a rally since the Federal Reserve’s decision last week to maintain stimulus, amid concern Bank Indonesia will tighten monetary policy further.
The index fell 2.3 percent to 4,460.413 at the close, the biggest drop since Aug. 27. The gauge has lost 210 points in three days, wiping out the 207.5-point gain on Sept. 19 after the Fed decided not to taper $85 billion in monthly bond purchases. PT Astra International, the top auto retailer, lost 6.6 percent, the most since October 2011. Property developer PT Lippo Karawaci slid 7 percent, the worst performer on the MSCI Asia Pacific Index.
Bank Indonesia has raised its benchmark interest rate by 1.5 percentage points since June to 7.25 percent to support the rupiah, which fell to the lowest level since April 2009 today. The currency erased last week’s 0.5 percent advance, which was spurred by the Fed’s decision.
“There’s concern that Bank Indonesia will raise rates again,” Jeffrosenberg Tan, a money manager at PT Sinarmas Asset Management, said by phone from Jakarta. “The market will remain volatile as long as the rupiah does not stabilize.”
The Jakarta index has declined 14 percent since May 22 when Fed Chairman Ben S. Bernanke first flagged a potential paring of stimulus. Foreign investors have since pulled $3.2 billion from local equities, data compiled by Bloomberg show.
The stock index is valued at 13.5 times 12-month projected earnings, compared with 10.6 times for the MSCI Emerging Markets Index, data compiled by Bloomberg show. Valuations for Indonesian stocks have fallen from this year’s high of 15.9 times on May 20.