Indonesia’s stock and currency markets touched multi-month lows on Friday as fresh COVID-19 restrictions in Jakarta ate into hopes of an economic recovery, while overnight selling on Wall Street kept sentiment across Asia subdued.
Jakarta’s main index rose 2 percent, after dropping nearly 3 percent early in the day, but was still on course for a weekly fall of around 5 percent that would be its worst performance since March.
The rupiah, the region’s worst hit currency this year, slipped 0.4 percent and was heading for its biggest weekly loss in a month.
Ahead of the open, Bank Indonesia said again it would intervene in the spot market to stabilize the rupiah, which backs one of Asia’s most popular bond markets for foreign investors.
Even with the spate of interventions in recent days, the currency has dropped 2 percent in the two weeks since investors were taken aback by a parliamentary panel’s recommendations for changes to the central bank.
Investors fear the proposed changes could reduce the central bank’s independence at a time when the economy is struggling with rising COVID-19 cases with a fresh lockdown in Jakarta from Monday threatening to add further harm to its economy.
“Foreign investors were already concerned about proposed changes to the central bank law that could erode Bank Indonesia’s independence,” said Khoon Goh, ANZ’s head of Asia research.
“Now with the capital heading into lockdown, Indonesia’s economic recovery is in doubt and this will see further investor caution, likely leading to near-term outflows.”
Equity markets in the rest of emerging Asia found their footing late in the day as Shanghai shares rose, with Manila .PSI up 1 percent and stocks in Seoul erasing losses to trade flat.
However, renewed selling of high-valued US tech stocks overnight kept investors uneasy.
“With risk sentiment edgy, investors are likely to remain on the sidelines heading into the weekend,” said Edward Ng, an Asian fixed income portfolio manager at Nikko Asset Management in Singapore. — Reuters