Indonesia’s rupiah hit a new lifetime low on Wednesday while equities in Asian emerging markets tumbled for a fifth straight session as US “reciprocal” tariffs on dozens of countries, including a massive 104 percent on Chinese goods, took effect.
An MSCI gauge of Asian emerging market equities plunged 2.2 percent to its lowest in a year and fell deeper into oversold territory. Most Southeast Asian equity indexes were also oversold and were creeping towards a bear market.
President Donald Trump’s punishing tariffs have rattled global financial markets over the past week, with his latest move to ratchet up levies on Chinese imports deepening the global trade war and intensifying recession concerns.
Many Southeast Asian countries have also been hit with hefty tariffs, and China is the region’s biggest trading partner.
“A major trade war between the US and China will not be the best piece of news for markets in the short term,” said Vasu Menon, Managing Director, Investment Strategy at OCBC.
Indonesia’s rupiah weakened to 16,965 per US dollar, a new record low, and stalked the 17,000 level despite aggressive intervention from the central bank in both the domestic and offshore markets.
“While Indonesia is less vulnerable to tariffs compared to regional peers, a widening EM (emerging market) risk premium and general risk aversion could continue to pressure rupiah,” said Wei-Liang Chang, FX and credit strategist at DBS Bank.
Equities in Jakarta rebounded after a sharp 8 percent loss the previous day but remained 15 percent in the red for the year.
Indonesian markets have been reeling sharply over the past three weeks due to concerns about fiscal stability and the fallout of US tariffs on local and regional growth, souring investors’ views on Southeast Asia’s largest economy.
