SINGAPORE- Indonesian markets surged on Thursday before stabilizing after Defense Minister Prabowo Subianto declared victory in the country’s presidential election and investors welcomed the prospect of policy continuation from incumbent Joko Widodo.
The removal of political uncertainty aided sentiment, analysts said, as Prabowo’s comfortable lead puts him on a trajectory for a decisive single-round win, putting off the likelihood of a drawn-out election that investors feared.
Indonesian stocks and the rupiah jumped to one-month highs at the start as traders reacted to the outcome, with markets closed in the previous session for the election. The rupiah however later retreated and stocks pared some of the gains.
Former special forces commander Prabowo clinched about 58 percent of votes in Wednesday’s election, according to unofficial “quick counts” by four independent pollsters, which in previous elections have proven to be accurate.
The official result is expected by March 20 at the latest.
“If confirmed, the result may have removed the need for (a) second round presidential election and brought forward some expectations of policy continuity and stability,” said Jeff Ng, head of Asia macro strategy at SMBC.
“Market expectations of policy continuity will likely help with rupiah stability in the medium term.”
A coalition of parties backing Prabowo had about 43 percent of votes, unofficial counts in the legislative contest showed, indicating a potential Prabowo government could have strong parliamentary backing.
The stock market was last 1.8 percent higher, after having risen more than 2 percent earlier in the session, while the Indonesian rupiah reversed early gains to last trade 0.2 percent lower at 15,620 per dollar.
