Indonesia shines as beaten-down assets rebound

BENGALURU: Indonesian shares jumped more than 3% and the rupiah strengthened on Thursday as bargain hunters returned to beaten-down assets, while Malaysian markets were little changed after the central bank delivered a widely expected hold on rates.

Sentiment towards Indonesian stocks has soured this year after an MSCI warning that the country could face a downgrade from its emerging-market benchmarks due to concerns over market transparency and trading practices.

“After the recent selloff, Indonesian equities are trading at historically very cheap valuations, while underlying macro and corporate fundamentals have not deteriorated to the same extent,” said Fakhrul Fulvian, chief economist at Trimegah Sekuritas Indonesia.

Data released on the day showed the country’s economy expanded 5.47% in the third quarter from a year earlier, surpassing analyst expectations in a Reuters poll.

Supporting sentiment further, authorities said Indonesia’s stock exchange would begin disclosing whether shareholders owning more than 1% of a listed company are controlling shareholders or affiliated with them, as part of efforts to improve market transparency.

“Today’s rally shows that valuations have become compelling. But for this to become a sustainable recovery rather than just a thin-liquidity rebound, Indonesia needs to turn cheap valuations into renewed foreign inflows,” Fulvian said.

Indonesia’s benchmark stock index, one of the world’s worst-performing markets this year, surged as much as 3.1%, while the rupiah firmed to 18,073 per US dollar.