Indonesian stocks fell the most since August 2013 as investors weighed falling corporate earnings and Australia’s warning that the execution of foreign nationals will damage relations.
The Jakarta Composite Index plunged as much as 4.3 percent, before paring losses to 2.6 percent at the close. PT Bank Central Asia, the country’s largest company by market capitalization, slumped 3.9 percent. PT Unilever Indonesia, the second biggest, sank 5.1 percent. The rupiah gained 0.3 percent.
Prime Minister Tony Abbott said Australia would take the “unprecedented” step of withdrawing its ambassador for consultations and called the executions of two of his countrymen convicted of drug smuggling cruel and unnecessary. A majority of companies in the benchmark index, including palm oil producer PT Astra Agro Lestari and automaker PT Astra International, have reported lower first-quarter profits.
“We have been progressively reducing our holdings because of growth momentum relative to expectations,” Alan Richardson, investment manager at Samsung Asset Management Co. in Hong Kong, said by phone.
Global funds have been net sellers of Indonesian stocks for all but two of the past 15 trading days after the equity gauge climbed to a record this month. The index has lost 2.3 percent this year, lagging behind an 11 percent gain by the MSCI Emerging Markets Index. Foreign investors sold a net $131.7 million of the nation’s equities on Wednesday.
Bank Indonesia Senior Deputy Governor Mirza Adityaswara said last week gross domestic product will likely increase 5.4 percent this year, the bottom end of the central bank’s estimates.
Myuran Sukumaran and Andrew Chan, who were arrested for attempting to smuggle heroin out of Bali in 2005, were killed by firing squad along with three Nigerians, one Brazilian, a Ghanaian and an Indonesian. A Filipino due to be executed was given a reprieve.
“It’s difficult to find anything much positive to mention on the political or economic front in Indonesia of late,” said Michael Every, head of financial markets research at Rabobank Group in Hong Kong. The executions aren’t “foreign investor friendly.”
Two-way merchandise trade between Australia and Indonesia reached A$12.1 billion ($9.7 billion) in the year to June 30, 2014. Australian Trade Minister Andrew Robb, who is seeking to finalize the trade agreement with Indonesia, shelved a delegation to Jakarta ahead of the executions.
Indonesian President Joko Widodo, known as Jokowi, declined to comment on Australia’s actions other than telling reporters on Wednesday that “this is our sovereignty.”
The Jakarta Composite trades at 21 times reported earnings, 47 percent higher than the 14.4 multiple of MSCI’s developing nation gauge. The stock measure’s relative strength index dropped to 22.5, its lowest since August 2013 and below the 30 level that signals stocks are oversold. The equity gauge, which also dropped 3.5 percent on Monday, closed at its lowest level since Dec. 17.
The Jakarta Composite rallied 22 percent last year as Jokowi, who came to office in October, pledged to spend heavily on roads, ports and railways and cut red tape in Southeast Asia’s largest economy.
“We haven’t seen a significant signs of recovery,” Alvin Pattisahusiwa, chief investment officer at PT Manulife Aset Manajemen Indonesia, said by phone on Tuesday. “It is likely that the growth rate in the first quarter could only be 5 percent or even less.”