Indonesia Stocks Fall to 16-Week Low as Rupiah Drops, Funds Sell

Indonesian stocks declined to the lowest level since Feb. 19 as rupiah forwards weakened to the lowest in more than three years and foreign investors sold the nation’s stocks for the 12th consecutive day.

The 466-member Jakarta Composite Index tumbled 3.5 percent to 4,609.948. The gauge has decreased 12 percent since climbing to a record on May 20, exceeding a fall of 10 percent that some investors consider a correction. One-month forwards on the rupiah gained 0.8 percent to 10,265 per dollar after falling by as much as 0.5 percent earlier today. The rupiah forwards fell 2.4 percent yesterday to the weakest level since August 2009.

Asian emerging-market currencies and stocks slumped today as the U.S. Federal Reserve considers paring asset purchases. A weaker rupiah threatens the profits of companies that either rely on imported raw materials or have high dollar-denominated debt, Andy Ferdinand, analyst at Batavia Prosperindo Sekuritas said by phone today. Foreign funds sold a net of $1.23 billion of local stocks in 12 days through June 10, according to data compiled by Bloomberg.

“The main theme today is foreign investors are leaving the country,” John Rachmat, head of research at Mandiri Sekuritas, said today by phone. “All stocks have been hit, including those that people think to be defensives.”

The nation’s stocks were downgraded to underweight today by UBS AG strategist Nicholas Smithie, who cited valuations that are the most expensive among emerging-market equities after the Philippines, Mexico and Chile.

Index Valuations

PT Telekomunikasi Indonesia, the country’s biggest telecom company, plunged 4.8 percent to lowest close since Feb. 26, the biggest drag on the benchmark measure.

PT Bank Rakyat Indonesia dropped 4.3 percent to its lowest close since Jan. 30. National carrier PT Garuda Indonesia tumbled 5.6 percent to a closing level not seen since January 2012. Auto distributor PT Astra International, the largest company in the index by value, lost 2.9 percent, its lowest close since July 2012.

The benchmark index is valued at 13.7 times projected 12-month earnings, compared with 15.9 times at its peak last month. Volume was 14 percent higher than the 30-day daily average. The gauge’s 30-day volatility index, a measure of price swings, was at 21.9, the highest in 11 months.

Today’s decline in Jakarta index was the steepest since June 4, 2012, and took the four-day drop to 8.2 percent, the most since September 2011. The gauge’s 14-day relative strength index dropped to 26.6, the lowest reading in about a year, data compiled by Bloomberg show.

Buying Opportunity

The Jakarta Composite Index could “technically” decline further to 4,200 level, Harry Su, head of research at PT Bahana Securities, said in an e-mail today.

“At around the 4,500 level, investors can begin selective buying on stocks or sectors with strong fundamentals with the view to further add to their positions assuming market performance would overshoot on the way down.” Su said. “With rupiah weakness, we are starting to like the palm oil sector with Astra Agro as our top pick.”

PT Astra Agro Lestari, largest palm-oil producer on the index by market value, rose 1.6 percent today. The stock was the biggest support to the broader index, followed by property developer PT Lippo Karawaci which gained 1.3 percent, its first rise in five days.

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