JAKARTA: The market has shown little to no reaction to the appointment of three new deputy ministers under President Joko “Jokowi” Widodo, two of whom have close ties with president-elect Prabowo Subianto, as global circumstances play a more commanding role for traders.

Both the Indonesia Stock Exchange (IDX) Composite index and the rupiah exchange rate weakened last Friday following the inauguration of the three new senior government officials, but economists attributed the changes chiefly to international developments.

The IDX Composite, the key gauge of stocks listed on the Jakarta-based bourse, dropped 0.36 % to a reading of 7,294 last Friday.

The Indonesian currency weakened about 0.1 % to trade near 16,200 rupiah per US dollar in the late afternoon last Friday, but that was in line with other currencies around the world that also depreciated slightly against the greenback.

David Sumual, chief economist at private lender BCA, told The Jakarta Post last Friday that the IDX Composite’s descent was not brought about by domestic politics, “since all are down in the regional market”.

Last Friday, Japan’s Nikkei 225 came down by around 0.1 % and Singapore’s Straits Times Index shed 0.7 %. The Hang Seng index had a harder time as it dropped by 2 %.

“I think the trend is that, according to my observations, the global economy is showing an indication of weakening,” said Sumual.

He said the latest domestic politic developments, where Jokowi appointed two of Prabowo’s close associates, were not affecting the market.

Rather, he suggested, the appointment of the next finance minister would be the one market participants would pay heed to.

Jokowi swore in Prabowo’s nephew Thomas Djiwandono as deputy finance minister and his former aide Sudaryono as deputy agriculture minister at the Presidential Palace last Thursday.

The ceremony also promoted Yuliot Tanjung, who has been working at the Investment Coordinating Board since 1988, to the post of deputy investment minister.

Singing from the same hymn sheet, state-owned Bank Mandiri chief economist Andry “Asmo” Asmoro told the Post last Friday that the weakening of the rupiah and the IDX Composite were “more because of global sentiment”, not domestic politics.

He wrote in last Friday’s midday analysis that valuations in nine out of 11 sectors tradable in the IDX were diminishing. Asian currencies except for the Singapore dollar and India’s rupee were also in a slump against the US dollar, Asmoro pointed out.

“Investors pay close attention to indications of future economic policy, including the possibility of geopolitical tension that may trigger economic fragmentation and protectionism that would impact the global economy,” said Asmoro.

He said statements from former US president Donald Trump, who is leading in the polls for the current US presidential race, suggested Washington may impose higher trade tariffs in the future.

“Market turbulence was further exacerbated by the escalating Sino-US trade tensions when Donald Trump suggested that Taiwan should compensate the United States for protection and accused it of appropriating America’s semiconductor industry,” he said.

Bank Permata chief economist Josua Pardede wrote that the rupiah had come under some pressure last Thursday because investors were shifting to different assets from other emerging markets. “The Philippines has given a clearer signal for cutting their policy rate soon, thus making their bond assets more attractive than Indonesia’s,” said Pardede.

Following the central bank’s monthly policy meeting in Jakarta, Bank Indonesia governor Perry Warjiyo announced last Wednesday that the monetary policy authority was holding onto its 6.25 % benchmark interest rate for now and likely would only start cutting in the fourth quarter of this year.

  - ANN