Indonesian markets inch up after authorities move to stem rout on MSCI expulsion fears
EWG•Indonesian stocks rose 3% after a record two-day $82 billion rout, as authorities introduced measures to address selling and concerns behind MSCI’s warning that it could remove the country from its global indexes. The benchmark index had fallen 14.8% over Friday and Monday, while the rupiah steadied at 18,010 per U.S. dollar.
1. Stocks rebound after rout
Jakarta’s benchmark index rose 3% on Tuesday after hitting a six-year low in the previous session. It had dropped 14.8% over Friday and Monday, and was down about 40% this year. MSCI said Friday it was considering moving Indonesia to “standalone” status from “emerging markets” status.
2. Authorities tighten market rules
The stock exchange halved the daily price down limit to 7% from 15%, and set a one-rupiah down limit for shares priced at 14 rupiah or less. The Indonesia Stock Exchange said it would exclude from its benchmark index stocks with high ownership concentration by the same person or entity. The financial regulator said it would advance reforms on transparency, liquidity and enforcement against coordinated trading; it also announced sanctions totaling 2.1 trillion rupiah over alleged manipulation involving shares of three firms.
3. Rupiah and credit concerns
The rupiah strengthened slightly to 18,010 per U.S. dollar, remaining near its June record low of 18,190. Fitch Ratings’ George Xu said the MSCI consultation itself was not expected to have material immediate credit implications, but external pressure could increase government borrowing costs and erode external buffers.
