Indonesia's financial markets experienced intensified declines on Monday, with the country's bonds, stocks, and currency all falling simultaneously.
The yield on the nation's 10-year government bonds surged by 33 basis points, reaching its highest level in over a year. The benchmark stock index plummeted by as much as 4% before paring some losses, while the rupiah dropped by 0.8%, hitting a record low.
Confronted with worsening market selling pressure, Indonesia is facing increasing demands for the government to implement more concrete measures beyond verbal assurances to curb the sell-off. Investors are seeking stronger signals that authorities will maintain policy discipline and support the markets. Growing concerns over the government's ability to manage the economy, confusion stemming from new commodity export rules, and renewed scrutiny of Indonesia's sovereign credit status are all undermining investor confidence.
Mohit Mirpuri, a partner at Singapore-based SGMC Capital Pte, stated that the next two weeks are critical. The market is looking for clear signs that the government possesses fiscal discipline, policy consistency, and a strong commitment to maintaining overall economic stability.
Analysts indicate that market sentiment is likely to remain pessimistic until the Indonesian central bank announces its interest rate decision this month and the MSCI releases its assessment report on Indonesia's investment eligibility. Even though the Finance Ministry and the central bank announced new measures over the weekend to support bond yields and attract capital inflows, speculation about a potential reshuffle of the economic policy team has further heightened unease.
Just five months after reaching a record high, the benchmark stock index has plunged nearly 39%, making it the worst-performing index among the more than 90 global indices tracked by Bloomberg this year. The rupiah has depreciated by approximately 8%, marking it as Asia's worst-performing currency this year, having breached the psychological level of 18,000 per US dollar last week.
Indonesian central bank governor Perry Warjiyo and Finance Minister Purbaya Yudhi Sadewa held a joint briefing in parliament on Saturday, pledging to maintain ample market liquidity and work together to boost yields and attract capital inflows. Warjiyo stated that the central bank would raise the interest rate on government funds deposited with it.
Josua Pardede, chief economist at PT Bank Permata in Jakarta, said that Saturday's announcement might help alleviate some market pressure but is likely insufficient to fundamentally reverse the market trend.
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