Indonesian market buoyed by increasing votes for ruling party
Indonesian markets rallied on Monday on news that the president's political party won the most votes in last week's election, increasing hopes that Southeast Asia's biggest economy can outperform other regional centres, reported Reuters.
President Susilo Bambang Yudhoyono's Democrat Party nearly tripled its vote to around 20 percent in Thursday's poll, early official results showed, although it will still need to form a coalition ahead of the July 8 presidential vote.
The benchmark stock index .JKSE, which lost about half its value last year, was up 5 percent by 0900 GMT, while the rupiah rose about 2 percent to 11,085 per dollar.
"With a stable democracy and even stronger government, Indonesia has a good chance of growing its economy faster than Southeast Asian peers," Nicholas Cashmore, head of research at CLSA Securities in Jakarta, said in an investor note.
Markets, which had been shut for holidays on Thursday and Friday, were also encouraged by favourable external factors such as rise in US stocks on Thursday, before the holiday weekend.
Resource firms such as coal miner PT Indo Tambangraya Megah Tbk, nickel producer PT International Nickel Indonesia Tbk and plantation firm PT Astra Agro Lestari Tbk rose by as much as 16 percent on the prospect of higher global demand and commodity prices, traders said.
Ferry Wong, an analyst at Macquarie Research, said in a note that Yudhoyono's economic team was expected to continue to favour a low interest rate environment benefiting banks such as Danamon and Bank Negara Indonesia, as well as cement firms such as Indocement Tunggal Prakarsa and auto distribution firm Astra International.
The strength in the rupiah was in contrast to some other regional currencies, such as the Thai baht, which fell in offshore trade on concern over political tensions after the army launched a crackdown on anti-government protests.
The Democrat Party's win in parliamentary polls was in line with market expectations but below levels indicated by some recent opinion polls, suggesting that Yudhoyono will have to form a coalition again for the presidential elections.
This could raise questions over how far Yudhoyono would be able to push ahead with sweeping reforms of the judiciary, civil service and other institutions considered key to attracting more foreign investment.
Andi Mallarangeng, one of the heads of the Democrat Party, told Reuters on Monday that the party would hold coalition talks with the Golkar Party and it would be "natural" to extend the existing alliance.
The Asian Development Bank (ADB) has forecast Indonesia's economy will grow 3.6 percent this year, down from 6.1 percent in 2008, but stronger than neighbouring countries such as Malaysia, Singapore and Thailand which are forecast to contract because of their dependence on trade to support growth.
Letters that do not contain full contact information cannot be published.
Letters become the property of AseanAffairs and may be republished in any format.
They typically run 150 words or less and may be edited
submit your comment in the box below