By Stefanno Sulaiman
JAKARTA (Reuters) -Indonesia’s stock market sank and the rupiah fell to a record low on Tuesday as markets reopened after an extended holiday break and reacted to global market turmoil caused by U.S. tariffs.
Trying to assuage concerns, President Prabowo Subianto held a gathering with business executives, during which his administration announced a spate of concessions for U.S. imports ahead of trade negotiations with Washington planned next week.
South East Asia’s biggest economy is seeking a deal to ease the impact of a 32% tariff due to take effect on Wednesday.
The main stock index fell 9.2% to its weakest since June 2021 in early trade, and ended the day 7.9% lower.
The rupiah fell as much as 1.9% to 16,868 per dollar, surpassing its Asian Financial Crisis trough to its weakest on record, according to LSEG data.
The central bank has and will continue to “intervene aggressively” in the spot foreign exchange, domestic non-deliverable forward (NDF) and bond markets, as well as in the offshore NDF market, to stabilise the rupiah, Fitra Jusdiman, a Bank Indonesia (BI) official said.
However, some analysts predict further declines, even as the stock exchange modifies trading rules to prevent excessive selloffs.
Ahead of Tuesday’s market opening, the exchange tightened auto-rejection rules for share transactions. Now, if a stock falls by 15%, sell orders would be automatically rejected, compared with the previous trigger of a share price fall of between 20% and 35%.
The bourse stated that a fall of 8% in the main index would trigger a 30-minute trading halt, expanded from 5% previously. Another 30-minute halt is triggered if the market then extended losses to 15%.
A decline of more than 20% would result in trading being suspended for the rest of the day, which the bourse said would allow investors “liquidity space and opportunity” to process information. The previous trigger for such suspension was a 15% drop.
“These are taken in anticipation of market conditions. We do not want to create panic, but we want domestic and foreign investors to have confidence that we give them enough room to transact after more than a week of break,” IDX chief executive Iman Rachman told a press conference.
Trading rules could be adjusted when conditions return to normal, an IDX executive said.
Oktavianus Audi, a vice president at brokerage Kiwoom Sekuritas, said the new auto-reject rules could provide some support for the stock index, but emphasised that the rule changes would only serve as short-term measures.
“Basically, the concern in the market is caused by macroeconomic factors and Trump’s tariff policy,” he said.
“So in our opinion, to ease market pressure we need strategic measures by the government to maintain the rupiah’s stability, ensure economic growth remains above 5% and a strategic response to maintain Indonesia’s trade surplus,” Audi said.
RATE CUTS?
Fitra at BI said the central bank would continue its market stabilisation efforts to maintain market confidence while it monitors developments.
Several economists expected more dovish moves by the U.S. Federal Reserve which may give BI space for bigger rate cuts, or bring them forward, to bolster growth. However, policymakers would have to weigh that against the impact it would have on the rupiah.
“Further one-sided weakness in the rupiah, due to global uncertainties and lingering lack of clarity on domestic issues, might push the markets to price out rate cuts this year,” said DBS Bank economist Radhika Rao.
Low inflation domestically also would provide room for BI to cut rates, said Bank Danamon economist Hosianna Situmorang, noting that annual inflation in March was 1.03%, below the central bank’s target range.
Brokerage Mandiri Sekuritas, in a note to clients, said it expected less impact from tariffs on Indonesian equities compared with other markets due to its more domestically-driven economy. It predicted Jakarta could outperform other markets should there be any softening in the U.S. position on tariffs.
Indonesian markets closed on March 27 for Eid al-Fitr holidays and are catching up with global market movements following the U.S. tariff announcement last week, which included a plan for a 32% tariff on Indonesian products.
Markets were already under pressure before the break due to concerns over Indonesia’s fiscal policy and growth prospects.
(Reporting by Stefanno Sulaiman; Additional reporting by Fransiska Nangoy; Writing by Gayatri Suroyo; Editing by John Mair, Jacqueline Wong and Kim Coghill)
