Indonesian Financial Markets Rise as President Jokowi Takes Over

Stocks, bonds and rupiah advance

Jakarta Globe, Dion Bisara, Oct 20, 2014

President Joko Widodo is sworn in during his presidential inauguration at the House
of Representatives building in Jakarta on Monday. (Reuters Photo/Darren Whiteside)

Jakarta. Indonesian financial markets rose on Monday, as Joko Widodo became the country’s seventh president, lifting optimism that he will guide the nation toward improving the economy and the public’s livelihood through reforms such as reducing costs on fuel subsidies.

The Jakarta Composite Index rose 49.72, or 1 percent, to 5,078.67 as of 11:30 a.m.

The rupiah rose 0.5 percent against the dollar to 12,048, according to data compiled by Bloomberg. The yield on the 10-year government note slipped to 8.070 percent from 8.210 percent on Friday, Bloomberg data show. Yields move inversely to price, indicating that Indonesian bond prices were higher.

Investors are eagerly waiting for clues on the make-up of his new cabinet and fuel subsidy policy, which are viewed as crucial to Joko’s commitment to improve the country’s economy.

“Jokowi’s first task is to announce his cabinet,” DBS Bank said in a note to clients on Monday. “It has been widely anticipated that technocrats will dominate the key economic portfolios, but markets will also look at the cabinet appointments for any cues of political bargaining.”

Next on the agenda is the long-awaited subsidized fuel price increase, said Lana Soelistianingsih, economist at Samuel Sekuritas. “Joko needs to increase the subsidized fuel price so that he will have funds to finance more productive programs.”

DBS said that the move will help to save about $15 billion from the 2015 state budget and will help to narrow the country’s current account deficit.

DBS, though, warns that Joko needs to maintain close coordination with Bank Indonesia, the central bank, in implementing policy in order to avoid shocks to financial markets.

“We believe that maintaining financial market stability is crucial for longer-term growth potential in GDP [gross domestic product], especially noting the adverse impact from a weak rupiah on investment growth since last year,” DBS said.

Joko, citing the Constitution at the legislative building, reminded that the country is still a long way in achieving its goals in protecting its people, improving their prosperity, developing the nation’s intellectual capacity, and contributing to a world order based on freedom, lasting peace and social justice.

“We can bear this heavy historical burden together, with unity, cooperation with each other, and hard work,” the president said.

Joko also promised to make the bureaucrats work so that all remote parts of the country “can enjoy government service.”

The president also said that he will build Indonesia from its seas, in an attempt to return the country to its maritime glory.

“We have too long been neglecting our oceans, seas, straits and bays,” Joko said.