| JAKARTA, July 10
JAKARTA, July 10 Indonesia's stock market is
expected to come under pressure on Thursday after both
presidential candidates claimed victory in a tightly fought
Jakarta Governor Joko "Jokowi" Widodo and ex-general Prabowo
Subianto on Wednesday both declared themselves the winner based
on contradictory quick count results in the closest election
ever in Southeast Asia's largest economy.
That suggests a winner will unlikely be known until official
results are announced in two weeks. The quick counts are
conducted by private agencies which collate actual vote tallies
from each district.
"With both camps declaring victory, the market could still
be held hostage by politics at least through July 22," said
Harry Su, head of research at Bahana Securities in Jakarta.
The rupiah and bond markets rose in offshore trade on
Wednesday, a public holiday in Indonesia, after Jokowi declared
victory. Prabowo countered soon after saying he had won.
The stock market, up 17.6 percent so far this year,
will have its first chance to respond to the political
uncertainty on Thursday. The market closed on Tuesday at its
highest level since mid-May.
"Given the scale of the economic challenge confronting
Indonesia's new president, and the country's domestic and
external vulnerabilities, a divided nation is the worst possible
outcome as far as the politics of economic reform are
concerned," said Nicholas Spiro, managing director of Spiro
Sovereign Strategy in an e-mail.
Foreign investors who own almost 80 percent of the free
floating Indonesian stock market have been buying, although
their investments have slowed to a trickle in the past month.
Data from the Indonesia Stock Exchange showed that by
Tuesday, foreign investors had invested a net 46.5 trillion
rupiah ($4 billion) so far this year.
The rupiah has risen 3 percent against the dollar
since last week, and is now around 11,600 per dollar. Local
bonds too have rallied, despite the threat of an imminent rise
in administered fuel prices and therefore in policy rates.
Some investors said Indonesia remained an attractive
long-term investment despite the uncertainty.
Winston Sual, president director of Panin Asset Management,
who has about 15 trillion rupiah ($1.29 billion) under
management, said he was not overly concerned by the election
dispute and would increase investment in the stock market.
Ari Pitoyo, chief investment officer at Eastspring
Investment Indonesia, said his firm was ready to enter the
market irrespective of who won.
"We believe all business activities will resume and some
volatility tends to give us a chance to invest," Pitoyo said.
Analysts at local brokerage Trimegah Securities said local
institutional investors were holding about $2.9 billion in cash,
after selling out of stocks when the presidential race changed
from being in Jokowi's favour to a close contest. These
investors were preparing to re-enter the market, Trimegah said.
Indonesia is heavily dependent on foreign portfolio flows to
finance its huge current account deficit, and has had several
bouts of capital outflows triggered by double-digit inflationary
spikes and currency volatility.
The bond market is among the emerging world's highest
yielding, with foreigners owning more than 35 percent of
outstanding bonds. That money is at risk should policy rates
climb too fast, or should a rise in U.S. yields cause portfolio
outflows from emerging markets.
($1 = 11,620 rupiah)
(Editing by Randy Fabi and Vidya Ranganathan)