Indonesia stocks sink most in nearly two years as emerging markets slump

JAKARTA (Reuters) - Indonesian stocks tumbled the most in nearly two years on Wednesday and authorities intervened “decisively” to support the currency and bond markets as a global rout in emerging market assets intensified.

Indonesian President Joko Widodo deliver a speech in front of parliament members at the parliament building in Jakarta, Indonesia, August 16, 2018. REUTERS/Beawiharta

President Joko Widodo blamed “a barrage of external factors” for the rupiah’s fall to 20-year lows and said the priority was to increase investment and exports to contain the current account deficit.

“There are only two key (things) - investments must continue to increase and exports must also increase so (we) can resolve the current account deficit,” Widodo said in comments posted on the cabinet secretary’s web page.

Indonesia’s current account deficit was 1.7 percent of gross domestic product last year, but is expected to widen to around 2.5 percent in 2018 as economic activity increases, Bank Indonesia (BI) has said.

Indonesia will also raise import taxes on 1,147 items, most of them consumer goods ranging from cosmetics to luxury cars, in a bid to cut imports, Finance Minister Sri Mulyani Indrawati said.

GRAPHIC: Indonesia's external debt -

GRAPHIC: Asian currencies YTD performance -

GRAPHIC: Asian currencies YTD and yields -

Indonesian assets have sold off as investors flee emerging markets, with the vulnerability of Southeast Asia’s biggest economy increased by worries about its current account deficit and need to import oil.

The threat of fresh U.S tariffs on another $200 billion worth of Chinese goods that could take effect after a public comment period in Washington ends on Thursday and a deepening sell-off in other emerging markets kept investors nervous.

Stock markets in China, India, the Philippines and Singapore fell alongside Indonesia’s as Asian markets, which had so far been sheltered from the rout in more indebted emerging economies, succumbed to news that South Africa had slipped into recession and to further market falls in Turkey and Argentina.

The Jakarta stock index .JKSE closed down 3.7 percent - its fifth straight session of losses and its sharpest one-day fall since November 2016.

The battered rupiah IDR= was trading at 14,940 against the dollar, around its lowest level since the Asian financial crisis in 1998. The currency has lost around 9 percent this year.

Indonesia’s central bank “decisively intervened” in the foreign exchange and bond markets on Wednesday morning to “smooth volatility” of the rupiah, Nanang Hendarsah, head of monetary management at Bank Indonesia (BI) told reporters.

On Wednesday, OCBC Bank in Singapore said attempts by BI to support the rupiah are slowing down its slide, but “are insufficient to turn the tide”.

Indonesia’s benchmark 10-year bond yield was at 8.448 percent, up from previous day’s closing of 8.340 percent.

The government has also announced plans to delay an estimated $24 billion to $25 billion in import-heavy power station projects, and enforce rules to keep export earnings at home, among efforts to prop up the rupiah.

To reduce the oil import bill, Indonesia has sought to boost the use of biodiesel.

Among other planned changes, Indonesian oil producers must offer crude to state energy company Pertamina before selling it overseas, a move expected to save the state energy company up to $4 per barrel on shipping costs.

Reporting by Tabita Diela, Gayatri Suroyo and Bernadette Christina Munthe; Writing by Ed Davies; Editing by Fergus Jensen and Richard Borsuk