Indonesia Stocks Index Nears Correction in Worst Week Since 2020

by BLOOMBERG / pic by TMR FILE

INDONESIA’S stock index tumbled more than 10% from its high in April, dragged by technology and bank shares.

The Jakarta Composite Index of shares lost as much as 1.4% as of 9:30 a.m. local time, extending this week’s losses to near 10%, the most since March 2020 on an intraday basis. That was the month the country shut its international borders to curb the pandemic. The gauge is down as much as 10.3% from its April 21 peak.

The nosedive marks a reversal for what was Asia’s best-performing major benchmark earlier this year, until a catchup game that followed a weeklong market closure pushed the index to erase its 2022 gains. Indonesia’s biggest tech startup GoTo Gojek Tokopedia was among the worst performers this week as the prospects of further US rate increases cast gloom on its outlook.

“The renewed fear about inflation and higher interest rates globally are behind the recent selloff in Indonesia,” according to John Teja, president director of PT Ciptadana Sekuritas Asia. “The downward pressure on Indonesian equities market is still there but I think the scope is getting limited. There are some companies that should benefit from the high commodity prices environment such as Adaro Energy and Harum Energy.”

As domestic inflation accelerates to a three-year high, economists are expecting Indonesia’s central bank to start tightening monetary policy sooner.

Foreign outflows are picking up pace, with overseas funds selling $469 million more shares than they bought in the past four days, set for the worst week since March.

“Bank Indonesia is seen being forced to raise interest rates, which becomes a bearish sentiment for stocks,” said Muhammad Alfatih, a senior technical analyst at Samuel Sekuritas Indonesia. Federal Reserve tightening and the potential that slowing global growth will weaken commodity prices are worsening pressure on the county’s stocks, he added.