Indonesian Stocks Drop With Rupiah as Election Outcome Disputed

Indonesian stocks fell the most in six weeks and the rupiah snapped a four-day rally on concern investments will be delayed until a clear winner emerges from the nation’s disputed presidential election.

The Jakarta Composite Index fell 1.3 percent to close at 5.032.599, paring this week’s advance to 2.6 percent. The gauge climbed yesterday after most of the quick counts suggested Joko Widodo had won the July 9 vote. The rupiah declined 0.1 percent to 11,586 per dollar, according to prices from local banks. The currency has strengthened 2.5 percent since July 4.

Foreign investors pumped $362 million into Indonesian equities yesterday, the biggest inflow since March, on optimism Widodo will replicate nationally the success he had as Jakarta governor in cutting red tape and boosting tax revenue. Widodo, known locally as Jokowi, had a lead of 2 to 6 percentage points according to initial unofficial counts. Rival candidate Prabowo Subianto disagrees, saying counts done by companies he used for guidance showed him leading.

“With one of the parties refusing to concede, it has put more uncertainty in the market,” said John Rachmat, head of equities research at PT Mandiri Sekuritas in Jakarta. He reiterated his forecast for the stock index to increase 11 percent to 5,550 by the end of the year.

Indonesians will have to wait until July 21 or 22 for final results to be announced, and possibly until late August if there are legal challenges.

Market Breather

PT Astra International, the country’s largest company by market value, declined 3.5 percent, the biggest drag on the benchmark index. PT Bank Rakyat Indonesia fell 1.5 percent from a record. PT Unilever Indonesia dropped 3.2 percent.

The benchmark gauge has risen 18 percent this year and trades at 14.7 times estimated 12-month earnings, according to data compiled by Bloomberg. The 14-day relative strength index reached 71.2 yesterday, exceeding the 70-level that some investors see as a signal a security is poised to fall.

Indonesia’s central bank held its benchmark interest rate at 7.5 percent for an eighth consecutive meeting yesterday, maintaining a tight policy setting to help narrow the current-account shortfall that it estimates widened to near a record last quarter.

“Eyes will be on the fundamentals from here until we get the final results,” said Andy Ji, a Singapore-based currency strategist at Commonwealth Bank of Australia. “It’s still the same old issue with the current-account deficit. There remains some uncertainty over the winner, so the market is taking a breather.”

Before it's here, it's on the Bloomberg Terminal.