Indonesia Stocks, Rupiah Hurt by Police Row With Anti-Graft Body

Indonesian shares fell the most in Asia and the rupiah snapped a four-day advance as a dispute between the police and the nation’s anti-corruption agency threatened to cast a shadow on President Joko Widodo’s economic reform agenda.

Widodo’s nominee for police chief, Budi Gunawan, was named a suspect by the KPK agency on charges related to a 2010 local election. Gunawan is a former aide to Megawati Soekarnoputri, who chairs the party that nominated Widodo for president. Police arrested a KPK official Friday and the army was sent to guard the agency’s headquarters amid rumors of a possible police raid. Widodo is known popularly as Jokowi.

“This is not about a perception that Jokowi is weak in handling corruption, but more about his determination to put the public interest ahead of the agenda of the political parties which supported him,” said Norico Gaman, head of research at PT BNI Securities in Jakarta. Investors are concerned “political factors might affect Jokowi’s ability to deliver economic progress,” he said.

The Jakarta Composite Index fell 1.2 percent to close at 5,260.024 in the worst decline since Dec. 16. PT Telekomunikasi Indonesia lost 2.4 percent, the most since Nov. 7 and the biggest drag on the gauge, while consumer goods company PT Unilever Indonesia slid 1.9 percent. PT Astra International, the largest company by market value, dropped 0.6 percent and PT Bank Mandiri lost 2.4 percent.

Jokowi said Sunday that the police and KPK must work hand-in-hand to eradicate corruption and that they shouldn’t be criminalized. He declined to publicly take sides in the dispute.

The president has pledged to tackle graft, cut red tape, streamline the bureaucracy and increase spending on roads, ports and power stations as he seeks to boost economic growth to 5.8 percent this year, from an estimated 5.1 percent in 2014.

The rupiah weakened 0.3 percent to 12,510 a dollar, the biggest decline since Jan. 7, prices from local banks show. The currency strengthened 1.2 percent over the previous four days.

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