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UPDATE 2-Rising election uncertainty hits Indonesia stocks, rupiah
May 20, 2014 / 4:31 AM / 4 years ago

UPDATE 2-Rising election uncertainty hits Indonesia stocks, rupiah

(Updates with market close, Gerindra comment)

By Fransiska Nangoy

JAKARTA, May 20 (Reuters) - Growing uncertainty over the outcome of Indonesia’s upcoming presidential election hit stocks and the rupiah for a second day on Tuesday.

The election abruptly turned into a tight two-horse race on Monday after the country’s second-largest party suddenly switched its support away from frontrunner Joko “Jokowi” Widodo to his rival, former general Prabowo Subianto.

Indonesian stocks recouped from deeper intraday losses to close down more than 2 percent at 4,895.96 points, adding to a decline of 0.3 percent the previous session. The rupiah also weakened, trading down 0.61 percent to 11,485 per dollar.

On Monday, stocks briefly rose to a near one-year high before losing all of the day’s gains following Golkar’s unexpected announcement that it would back Prabowo’s Gerindra party.

“Investors are using the political momentum as a reason to sell off. They are securing their profits since the main stock index has gained significantly since the beginning of the year,” said Muhamad Alfatih, a Jakarta-based analyst with Samuel Sekuritas.

Despite the two-day sell-off, the index was still one of the best performing stock markets in Southeast Asia, up more than 14 percent since the end of last year.

With Golkar’s substantial support, Prabowo now has a slightly larger coalition to campaign for him ahead of the July 9 election than frontrunner Jokowi.

“(Golkar joining our coalition) is a great gift for us because without them we are not complete,” Fadli Zon, vice chairman of Gerindra, told reporters after Prabowo registered his candidacy with the election body.

Indonesia’s presidential elections, however, are heavily based on the candidates rather than the party. The campaign officially begins on June 14.

Jokowi for months has maintained a significant lead over Prabowo in opinion polls. One recent poll showed Jokowi’s lead had narrowed slightly, although he was still 15 points ahead.

Analysts said they were concerned that the next president could find it difficult to pass major reforms if they face strong opposition in parliament.

“Our concern is much less about Jokowi’s ability to win the presidential election, but more about the ability of the PDI-P (Indonesian Democratic Party of Struggle) to control parliament in order to support Jokowi’s government,” said Wilianto Ie, head of research at Maybank Kim Eng in Jakarta. (Additional reporting by Eveline Danubrata and Kanupriya Kapoor; Writing by Randy Fabi; Editing by Kim Coghill and Jacqueline Wong)

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