Jakarta Stocks Fall Most in Six Weeks on Rupiah, Credit Outlook

Indonesian stocks declined the most in almost six weeks as the rupiah fell to a four-year low amid concerns the central bank’s new reserve requirement rules may slow lending.

The Jakarta Composite Index fell 2.5 percent to 4,568.654 at close, its steepest decline since July 8. PT Bank Rakyat Indonesia, the country’s second-largest lender by assets, fell 6 percent and PT Bank Mandiri retreated 3.5 percent. The Jakarta Stock Exchange Finance index fell 3.8 percent, the biggest decliner among nine industry groups.

Bank Indonesia yesterday said it will increase the secondary reserve requirement for lenders to 4 percent from 2.5 percent and said banks with a loan-to-deposit ratio outside a range of 78 percent to 92 percent would have to deposit additional reserves with the central bank. The range was narrowed from 78 percent to 100 percent previously.

“This could result in slower loan growth,” Hadi Soegiarto, an analyst at PT CIMB Securities Indonesia, wrote in a report yesterday. “The growth of the Indonesian banking sector remains at risk, particularly from further tightening.”

Automotive distributor PT Astra International fell 3.1 percent and PT Indomobil Sukses Internasional declined 4.6 percent. Property developer PT Alam Sutera Realty fell 2.5 percent and Bumi Serpong Damai retreated 3.6 percent. Slower loan growth will affect automotive and home sales, Jeffrosenberg Tan, a portfolio manager at Sinarmas Asset Management, which manages about 5.9 trillion rupiah, said by phone from Jakarta today.

The central bank left its benchmark interest rate unchanged at 6.50 percent at a policy meeting yesterday.

The rupiah fell 0.4 percent to 10,388 per dollar as of 3:50 p.m. Jakarta time, according to prices from local banks. It touched 10,435 earlier, the weakest level since June 2009. The currency extended its decline after Indonesia’s foreign reserves dropped to the least since 2010.

“By keeping the benchmark rate unchanged, the market is reading that as a signal that the central bank is prioritizing growth,” John Rachmat, head of equity research at PT Mandiri Sekuritas, said by phone today. “That put a lot of pressure on the currency and probably would put more pressure on bonds and the equities market.”

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