Markets unmoved by political tensions
Aditya Suharmoko , The Jakarta Post , Jakarta | Thu, 03/04/2010 9:17 AM | Business
Indonesia’s stock and currency markets seem relatively immune from the heightened political tensions at the House of Representatives at least in the short term, analysts said.
But they warned the political tensions might be damaging in the medium- to long-term if they could not be quickly resolved.
On Wednesday Indonesia Stock Exchange data showed the main price index dropped 0.4 percent to 2,567.09 points. The rupiah climbed 0.1 percent to 9,290 per US dollar at 3:40 p.m. in Jakarta .
Both the rupiah and the share index showed upward movement on Tuesday while anti-government protests turned slightly violent outside the House building, and lawmakers inside the building shoved and argued over the controversial bank bailout.
The tensions resulting from the House’s inquiry into the government’s Rp 6.76 trillion bailout of Bank Century (now named Bank Mutiara) had yet to result in significant negative impacts on market confidence, analysts said.
“There was not a significant drop in stock prices. I’m not sure if investors see the [tensions] as a threat in the short term,” said Bank Danamon chief economist Anton Gunawan.
BNI chief economist A. Tony Prasetiantono said there was a negative sentiment but the market was not affected.
“Our market is immune to these kinds of incidents. As for the rallies, the financial market is well-experienced after the 1998 [financial] crisis,” he said.
The central bank also said all indicators on the country’s economic fundamentals remained quite
positive as indicated by the low inflation rate and high foreign reserves.
The year to year inflation rose 3.81 percent in February while foreign exchange reserves remain high at US$70 billion compared to $66.10 billion in December last year.
“These factors reduce the negative impact resulting from the heightened political tension over the bank bailout,” said Bank Indonesia Deputy Governor Hartadi A. Sarwono. “What’s important is the market sees the monetary and banking authority still performing its job well.”
Finance Minister Sri Mulyani Indrawati, who become a central figure blamed by some parties for the bailout, said the government would continue to manage the economy. “There is no need for excessive worries,” she said.
Anton said if the bailout policy led to legal action, it could create fear of taking financial or macro-economic decisions among policy makers. “This would eventually affect the reform process,” he said, adding that the market would react negatively if Mulyani was removed from her position as finance minister.
“They [investors] would see what could happen to our fiscal policies,” Anton said.
Tony said the recent statement made by President Susilo Bambang Yudhoyono that he would accept to be held “responsible” for the bailout policy decision was appreciated by the market.
“The President is confident the policy was correct. In fact, our financial sector was saved from the global financial crisis, and the banks performed well,” he said.
