JAKARTA: Indonesian authorities need to provide firm policy guidance and unveil concrete steps to improve sentiment after last week’s sell-off that pummelled stocks and the currency, according to analysts, who say investors will remain unconvinced by assurances alone.
Market participants will largely be in a wait-and-see mode ahead of Bank Indonesia’s interest rate decision on June 18, and MSCI Inc’s review of the country’s investability later this month, analysts said.
In the meantime, suggestions of a reshuffle of policymakers will add to uncertainty, they said, even as the Finance Ministry and central bank unveiled another measure over the weekend to support bond yields and attract inflows.
“The next two weeks wil be critical,” said Mohit Mirpuri, a partner at SGMC Capital Pte in Singapore.
“The market is looking for clear signs of fiscal discipline, policy consistency and a strong commitment to macroeconomic stability.”
Mounting concerns over the government’s economic management, confusion regarding new commodity export rules and revived concerns about Indonesia’s sovereign credit profile have sent Indonesian assets downwards.
Just five months after hitting a record high, the benchmark stock index has tumbled nearly 39% to become the worst performer this year among more than 90 global gauges tracked by Bloomberg.
Last week was its poorest performance in more than four years.
The rupiah has weakened about 8% to become the worst-performing currency in Asia this year as it fell to multiple record lows and breached a psychological level of 18,000 per dollar last week.
While bonds also dropped, the decline was relatively modest as the central bank and Finance Ministry intervened in the market to keep yields, especially on 10-year debt, steady.
Bank Indonesia governor Perry Warjiyo and Finance Minister Purbaya Yudhi Sadewa held a joint briefing last Saturday, pledging to maintain sufficient liquidity in the market, and to work together to boost yields and capital inflows. — Bloomberg