Indonesia’s Stocks Fall Most in Six Weeks After S&P Cuts Outlook

Indonesia’s stocks fell the most in about six weeks and bonds dropped after Standard & Poor’s cut its outlook on the rating for Southeast Asia’s biggest economy.

S&P revised its outlook on Indonesia’s BB+ rating to stable from positive. PT Bank Mandiri and PT Bank Rakyat Indonesia, the two largest lenders by assets, slid more than 3 percent while PT Astra International, the largest company by market capitalization, retreated 1.4 percent. The three companies were the biggest drag on the Jakarta Composite Index.

“This will trigger a correction in the stock market,” Fadlul Imansyah, fund manager at CIMB-Principal Asset Management, said by phone from Jakarta. “Some investors decided to lock in their gains since the Jakarta Composite Index gained so much.”

The Jakarta Composite fell 1.2 percent, bound for its steepest decline since March 22. Before today’s drop, the benchmark index had risen 17 percent this year and traded at 15.4 times 12-month projected earnings, the highest level since Nov. 10, 2010, according to data compiled by Bloomberg. The gauge has doubled since the end of 2009, bolstered by an economy that has expanded more than 6 percent annually in the past three years.

“The outlook revision to stable reflects our assessment that the stalling of reform momentum and a weaker external profile have diminished the potential for a rating upgrade over the next 12 months,” S&P said in a statement today.

Government bonds fell after the report, pushing the yield on 10-year notes to the highest level since April 11, according to prices from the Inter Dealer Market Association.

The rupiah slid to as low as 9,764 per dollar earlier, the weakest level since April 5, before rebounding to hold steady at 9,727, prices from local banks compiled by Bloomberg show.

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