| JAKARTA, March 22
JAKARTA, March 22 Indonesian shares dropped 1.7
percent on Friday, their biggest intraday slide since July,
shaken by the negative sentiment in Europe coupled with the
uncertainty over the government's policy on subsidised fuel.
Asian shares hovered near 2013 lows and gold stayed close to
a one-month high on Friday as Cyprus scrambled to find a
solution to its funding crisis and concern over the health of
the euro zone mounted.
Southeast Asia's biggest economy is also mulling over its
subsidised fuel policy, which could result in an fiscal deficit
larger than 2 percent of the gross domestic product this year.
Jakarta's blue chip index slid 2.12 percent,
dominated by mining stocks which dropped 3 percent
while the consumer index fell 2.5 percent.
Coal miners PT Bumi Resources and Indika Energy
dropped more than 5 percent each to 720 rupiah and
1,210 rupiah respectively.
"The fuel subsidy policy is linked to the political
situation. If the government is reluctant to take action, they
need to come up with an alternative," said Purwoko Sartono, a
Jakarta-based analyst at Panin Sekuritas."
Indonesia's plan to raise the subsidised fuel price was
disbanded last year, resulting in a negative reaction from
"There are not many ways to guard the government's balance
of payment, but that's what the market players and foreign
investors are waiting for. It's not good for the short term, but
will benefit the country in the long term." Sartono told
Finance Minister Agus Martowardojo also said in order to
manage mounting fuel subsidies that could enlarge the fiscal
deficit ahead, the Indonesian government could cut its capital
spending before deciding to raise the subsidized fuel price.
"If the government were to cut capital spending, it could
decelerate the government's role in providing positive
multiplier effect to the economy in our view," Jakarta-based
Bahana Securities said in a note on Friday.
Indonesian stocks are expected to remain under pressure in
the coming weeks, waiting for some certainty in fuel policy,
updates on the new central bank governor and anticipating March
The Jakarta Composite Index was ended down 79.5
points at 4,723.2, the second highest drop in Southeast Asia,
compared with the Vietnamese Index, Singapore's Strait
Times and Malaysian Bursa which were down less
than 0.4 percent. Thailand shares are down 3.3 percent.
($1 = 9,733 rupiah)
(Editing by Anupama Dwivedi)