(Updates prices, adds comment)
* Jakarta share index falls 5.6 pct, wiping out 2013 gains
* Rupiah touches lowest level since May 2009
* Worsening current account deficit, inflation worry
By Andjarsari Paramaditha
JAKARTA, Aug 19 Indonesia's rupiah slid to its
lowest level in four years on Monday, shares fell the most in 22
months and government bonds slumped on concerns over a much
wider current-account deficit in Southeast Asia's biggest
Indonesia's glow as an investor haven has started to look
tarnished, with rapid growth slowing, the current account
deficit widening sharply, while a recent jump in inflation and
moves to slow expansion bank lending will likely cut domestic
Some economists said Indonesia increasingly faces the
uncomfortable prospect of being lumped by investors together
with fellow Asia giant, India, whose markets have been falling
even sharper over worries about its economic management.
"There is a risk that Indonesia could be like India, (with
market risk) dominated by perception instead of economic
fundamentals," Eric Alexander Sugandi, economist at Standard
Chartered in Jakarta, said.
At 0954 GMT, the rupiah was trading at 10,490 to the
dollar, down just over 1 percent and its lowest level since May
2009. The rupiah has slid 8.2 percent this year. As it slides,
the central bank has dug deep into its foreign-exchange reserves
to defend it, stoking concerns in markets.
The yield on 10-year notes rose to the highest since March
2011 though later eased back to 8.338 percent.
The driving factor for both developments was late Friday's
news that the current account deficit in the second quarter was
worse than expected at $9.8 billion, one of the biggest on
At the end of July, Indonesia's foreign-exchange reserves
were $92.7 billion, down $12.4 billion from two months earlier
and more than 25 percent below their August 2011 high, say
economists at Credit Suisse.
"Although the current level of reserves is still equivalent
to a reasonably healthy 5.5 months of imports, the (central)
bank can't continue to burn reserves at the current rate without
the market worrying about a 'crisis' scenario unfolding," it
said in a note to clients on Monday.
The Jakarta Composite Index (JCI) closed down 5.58
percent at 4,313.52, its biggest one-day fall since October
2011. That followed a 2.5 percent drop on Friday when foreign
investors pulled almost $90 million from Indonesian stocks on
fears over the impact a coming stimulus cut in the United States
and tighter global liquidity would have.
The plunge wiped out all the benchmark's gains since the
start of the year.
The biggest losses have been bank stocks. The finance sector
index fell 3.81 percent on Friday after the central
bank unveiled moves to contain bank lending, including trimming
the maximum ratio for loans-to-deposits. On Monday, it plummeted
another 6.34 percent.
Indonesian Finance Minister Chatib Basri said on Monday he
was "not worried" by the rupiah weakness and predicted that the
current account deficit, though it would remain into next year,
Late last month, Bank Indonesia Governor Agus Martowardojo
said the currency had reached a "new equilibrium", suggesting
the central bank was comfortable with the weakening rupiah that
helped exports as long as its fall was not too abrupt.
The central bank also has said it did expect pressure on the
current account to ease in the second half of the year.
Indonesian government bonds have also been hit.
"Bond yields have been quite volatile since last week,
affected by the weakening rupiah and high inflation, coupled
with rising treasury yields globally," said Handy Yunianto, head
of fixed income research at Mandiri Sekuritas in Jakarta.
A weaker global economy threatens to further cut into the
exports of natural resources on which Indonesia's economy has
long relied. At the same time, high inflation limits the
prospects for domestic consumption to pick up much of the slack.
The latest market reverses follow a fairly upbeat budget for
next year, announced on Friday by President Susilo Bambang
Yudhoyono, who forecast 2014 growth would rise to 6.4 percent
next year and the inflation rate would slide back to 4.5
percent. (In July, the annual inflation rate spiked to 8.61
Most economists say growth this year will struggle to hit 6
percent, especially as the central bank has raised its benchmark
interest rate in a bid to contain high inflation.
But one Indonesian fund manager said he expected interest in
buying shares will return if the index drops some more, reaching
between 4,000 and 4,200.
"Overall, the JCI is still valued at a slight premium to
regional indices in term of P/E (price-earning) ratios. That's
why investors are still waiting for cheaper prices to jump into
the market," said Jemmy Paul, head of investment at Sucorinvest
(Additional reporting by Viparat Jantraprap in Bangkok, Adriana
Nina Kusuma and Rieka Rahadiana in Jakarta and Jongwoo Cheon in
Singapore; Writing by Jonathan Thatcher; Editing by Richard