Stock Prices Rebound in Indonesia

Indonesia’s stumbling financial markets have been given a much-needed boost by foreign funding. Fresh hope that European leaders would intervene on Indonesia’s debt crisis resulted in a rush of buying, causing the local exchange’s main price index to rise.

On Tuesday, the benchmark stock index was boosted by 4.76 percent (almost 158 points) to 3,473.94. Foreign investors control more than half of the publicly traded stocks on the Indonesia Stock Exchange, and yesterday they made a whopping Rp 42 billion worth of net purchases.

Bambang Eko Joewono, head of the global-markets division at United Overseas Bank Indonesia, told Bloomberg:

“The appetite for risk is coming back because of the move by the European Central Bank. That creates positive sentiment for the rupiah.”

Indonesia’s currency felt the benefits also – by 4:45pm in Jakarta, the rupiah had appreciated 1.7 percent to Rp 8,905 against the US dollar. After September’s 4.2 percent loss, the rebound was welcome.

Previously, the economic slowdown in the US and European debt problems were causing investors across the globe to dump risky assets – including those with Indonesia.

In August, The Jakarta Composite Index had started strongly, but plummeted a huge 20 percent from its 4,193 peak, after international fund managers dropped more than Rp 13 trillion worth of Indonesian shares.

The rupiah felt the strain from this, upsetting the government’s and people’s purchasing power and the ability of companies to pay back borrowings from abroad.

Yesterday however, the yield on 10-year government debt fell 1.5 basis points to 7.20 percent.