* C.bank vows increased market intervention amid volatility
* BI cuts RRR in foreign currencies, rupiah
* Rupiah, stock market cut losses after announcement (Adds finance minister and stock exchange comments, closing prices)
By Tabita Diela
JAKARTA, March 2 (Reuters) - Indonesia unveiled new measures on Monday to stabilise its financial markets and support growth in Southeast Asia’s largest economy, amid capital outflows linked to the coronavirus outbreak as it reported its first confirmed cases.
Bank Indonesia (BI) will increase market intervention, cut reserve requirements and relax rules for domestic non-deliverable forward (DNDF) transactions to support the rupiah and bonds, Governor Perry Warjiyo said.
Separately, Finance Minister Sri Mulyani Indrawati said import rules for raw materials will be eased as stocks in factories were low amid a trade slowdown due to the global spread of the coronavirus.
In financial markets, Indonesia’s stock exchange (IDX) on Monday suspended all short selling until further notice.
The rupiah, which this year had been the best performing among emerging Asia currencies, fell 4% last week and a further 0.5% earlier on Monday to 14,415 - its weakest since May 2019 - after Indonesia announced its first confirmed coronavirus cases.
The currency recovered to 14,260 following the new measures, posting a 0.6% gain by closing, but the stock index extended losses to 1.7%. The index fell 7.3% last week.
“In Indonesia, we’re taking this seriously. We assess from time to time so that the impact of COVID-19 to the stability of our economy can be mitigated,” Warjiyo said, referring to the global outbreak caused by the virus.
He said the impact on Indonesia’s economy would be less pronounced than countries like Japan, South Korea and Singapore.
The central bank would increase the volume of its “triple” intervention in the spot foreign exchange, DNDF and bond markets so investors “remain confident that BI is always in the market to do its job”, Warjyo said.
The level of reserves in foreign currencies that banks must park at BI would be cut by 400 basis points (bps) to 4%, a measure that would pump $3.2 billion into the banking system starting on March 16, Warjiyo said.
A similar requirement for rupiah savings would also be cut by 50 bps for banks that lend to exporters and importers starting on April 1 and be effective for nine months, he said.
BI will also allow domestic NDF transactions to be based on sales of government bonds by foreign investors, if the proceeds are placed in a rupiah savings account, Warjiyo said, arguing that some foreign investors were looking to reinvest once market volatility subsided.
Last month, BI cut interest rates by 25 bps, its fifth rate cut since May, to mitigate the economic impact of the virus outbreak. It also trimmed its 2020 gross domestic product growth outlook to a range of 5.0%-5.4% from 5.1%-5.5%.
The government also announced a nearly $750 million stimulus package to support domestic consumption and tourism.
Minister Indrawati said more tax breaks could be provided.
Meanwhile, Laksono Widodo, a director at IDX, said although short selling did not contribute significantly to the stock market’s recent plunge, the measure was taken to prevent further instability.
“We don’t want people to take advantage of the situation and make conditions worse,” he said. (Additional reporting by Maikel Jefriando, Fransiska Nangoy and Bernadette Christina Munthe Writing by Gayatri Suroyo Editing by Robert Birsel and Emelia Sithole-Matarise)