Indonesian stocks hit 2020 lows; rupiah breaches 18,000 per dollar

BENGALURU: Indonesian stocks plunged 5 percent to their lowest in more than five years on Thursday and the rupiah breached the 18,000 level, prompting central bank intervention to halt its accelerating free-fall.

Equities in most emerging Asian markets slid from record highs on renewed fighting between the US and Iran, although a ceasefire deal between Israel and Lebanon helped bring oil prices lower.

The MSCI gauge of EM Asia stocks fell about 2 percent from record highs, dragged lower by South Korea and Taiwan equities that make up over half the index.

The Indonesian rupiah tumbled to a record low of 18,045 per dollar on the day and held near the level despite the central bank’s intervention in the foreign exchange markets.

The currency has lost more than 7.5 percent against the dollar this year, overtaking the Indian rupee as the region’s worst performer.

The Jakarta Composite Index sank 5 percent to its lowest since December 2020, extending its year-to-date decline to more than 33 percent, the steepest fall in emerging markets.

Confidence has been dented by fiscal concerns, equity market governance issues highlighted by an MSCI review, risks to central bank autonomy and shifting commodity export policy.

Data released on Tuesday showed Indonesia’s trade surplus had shrunk to a six-year low in April and inflation in May moved toward the top of the target range, underscoring the country’s exposure to the fallout from the Middle East conflict.

Yield on Indonesia’s 10-year bond jumped to 6.780 percent, while the 1-year bond yield stood at 7.019 percent.

Asian assets continued to take the heat as renewed fighting in the Middle East and elevated energy prices strain energy-import dependent economies’ current accounts and drive up inflation.