KUALA LUMPUR, Dec 16 (Bernama) -- Bursa Malaysia extended its positive performance, closing higher for a fourth consecutive session, supported by improving local market sentiment underpinned by a firm domestic macroeconomic backdrop. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) rose 4.59 points, or 0.28 per cent, to 1,648.31, from Monday’s close of 1,643.72. The index had opened 0.95 of a point lower at 1,642.77, and moved between 1,636.50 and 1,648.71 throughout the trading session However, on the broader market, decliners beat gainers 699 versus 408. A further 520 counters were unchanged, 1,149 untraded and 12 suspended. Turnover rose to 2.59 billion units worth RM2.27 billion from 2.50 billion units worth RM2.16 billion on Monday.
Key Takeaways:
The Jakarta Composite Index dropped up to 1.8%, while the rupiah slid 1% against the USD, the worst performer among emerging peers.
Respected former Finance Minister Sri Mulyani Indrawati’s exit raises investor fears of weaker fiscal discipline under President Prabowo’s administration.
Foreign investors sold US$845M in September, amid protests and political uncertainty.
New Finance Minister Purbaya Yudhi Sadewa vows to keep fiscal deficit below 3% of GDP, but credibility remains to be built.
Market Reaction: Sharp Selloff Across Assets
Indonesian assets tumbled on Tuesday following the removal of long-time Finance Minister Sri Mulyani Indrawati. The Jakarta Composite Index lost as much as 1.8%, led by banking stocks such as Bank Rakyat Indonesia (-2.3%) and Bank Central Asia (-2.3%). Government bonds also sold off, with the 5-year yield climbing 11bps to 5.87% and the 10-year up 5bps to 6.44%.
The rupiah slumped 1% against the dollar despite Bank Indonesia intervening in both the currency and bond markets. Year-to-date, the rupiah is down more than 2%, making it Asia’s second-worst currency performer after the Indian rupee.
Political Overhang: Fiscal Concerns Dominate
Markets are questioning whether Indonesia’s decade of fiscal discipline will hold under President Prabowo’s more populist policies, such as the free school-lunch program. Indrawati’s departure follows weeks of speculation and coincides with the largest anti-government protests in years, intensifying fears of capital outflows.
According to Bloomberg data, overseas investors have already offloaded about US$845 million in Indonesian stocks and bonds in September.
New Minister’s Challenge: Confidence Building
New Finance Minister Purbaya Yudhi Sadewa pledged to accelerate economic growth toward 6% while ensuring the fiscal deficit stays within the 3% of GDP legal cap—critical to preserving Indonesia’s credit rating. However, analysts caution that aligning too closely with Prabowo’s spending agenda could weigh on investor confidence.
MUFG strategist Lloyd Chan noted that “the pressure on the rupiah could ease once Purbaya builds credibility around fiscal policy.”
Outlook: All Eyes on BI and Investor Sentiment
With protests ongoing and global investors reassessing risks, attention now turns to Bank Indonesia’s FX interventionsand interest rate stance. Citi economist Helmi Arman expects BI to prioritize FX stabilization and hold off from cutting rates this month.
Meanwhile, analysts warn that banking stocks could remain under pressure, given risks of looser credit growth policies impacting asset quality.
Bottom Line for Investors:
Indonesia faces a pivotal moment. While fundamentals remain supported by growth prospects, political noise and fiscal credibility risks are set to drive near-term volatility. We recommend investors stay cautious on Indonesian equities and bonds until clearer signals emerge from the new finance minister and Bank Indonesia.
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