Indonesian Equities Erase Gains Recorded Under Widodo Regime

Indonesian stocks slumped the most in five weeks, erasing gains recorded since President Joko Widodo took office, on concern about the nation’s economic outlook.

The Jakarta Composite Index fell 1.7 percent to 5,014.99 at the close, its lowest since Nov. 10. The gauge is now 0.5 percent below the level before Widodo, known as Jokowi, was sworn in on Oct. 20. PT Bank Mandiri tumbled 3.5 percent on Monday, the biggest drag on the benchmark gauge. PT Bank Rakyat Indonesia lost 2.7 percent and PT Unilever Indonesia retreated 1.4 percent.

Indonesia’s economy unexpectedly contracted for a second straight quarter in the three months ended March 31 from the previous period, according to data released last month. The slowdown underscores the challenge facing Jokowi as he seeks to reinvigorate growth by boosting infrastructure spending in southeast Asia’s third-largest economy. The government’s target of 5.7 percent growth this year is difficult to achieve, Finance Minister Bambang Brodjoneg said on Monday.

“The market will remain sensitive to economic momentum until we see concrete progress on infrastructure,” Mixo Das, a strategist at Nomura Holdings Inc. in Singapore, wrote in a research report on Monday. “Our economists forecast GDP growth will slow further to 4.6 percent in the second quarter.”

Indonesia’s gross domestic product contracted 0.18 percent in the three months ended March 31 from the previous quarter, according to government data. The economy grew 4.71 percent from a year earlier, missing most estimates in a Bloomberg survey.

Syaiful Adrian, an analyst at PT Ciptadana Securities, said the valuation of Indonesian stocks couldn’t be justified with a slower growth outlook. The benchmark gauge trades at 14.6 times its 12-month estimated earnings, compared with 11.9 times for the MSCI Emerging Markets Index.

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