Indonesia investment chief warns of severe market slump if Jokowi loses

JAKARTA • Indonesia’s investment chief warned of a severe sell-off in the nation’s currency and stocks if voters deliver an upset victory for the Opposition in next month’s presidential election.

“If there was an election surprise, I think the markets will crash. The currency will probably crash,” Tom Lembong, chairman of Indonesia’s Investment Coordinating Board, said in an interview on Monday in Jakarta.

President Joko Widodo is the favourite to win the April 17 vote, with a survey on Monday showing him with a lead of almost 26 points over his rival, Prabowo Subianto. Jokowi, as the incumbent is known, defeated Subianto, a former general, in the 2014 election.

If the Opposition candidate wins, he and his running mate Sandiaga Uno “would have to move quickly to re-establish market confidence, to basically gain the market’s trust”, Lembong, who is a former banker and now a minister in Jokowi’s Cabinet, said.

They would have to “disavow some of their more extreme policy positions”, such as plans to halt imports of food, he said. “They would have to make speeches citing that fiscal prudence is important, that ratings are important to them, that they want to preserve the gains we’ve made on sovereign credit ratings.”

Indonesia’s rupiah has rebounded from last year’s emerging-market rout, gaining 1.2% against the dollar this year. The benchmark Jakarta Composite Index is up 4.6% in the same period.

“The market expects continuity and stability,” Lembong said. “They can be wrong, of course.”

Lembong said investors are signalling confidence in Jokowi winning a second term with capital flowing back into Indonesia in the first three months. The economy is on track to record double-digit growth in foreign direct investment in 2019, which would be a turnaround from last year, when it fell by 8.8% to 392.7 trillion rupiah (RM112.54 billion).

The investment chief said Jokowi’s government remains committed to opening up the economy, despite delays in overhauling foreign ownership rules.

“If we get re-elected we’re still not out of the woods,” he said. “We would have to move quickly to regain lost momentum on some of the delayed reforms such as further revisions of the negative investment list.” — Bloomberg