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Indonesian shares, rupiah rise after Jokowi gets Golkar support
May 14, 2014 / 1:53 PM / 4 years ago

Indonesian shares, rupiah rise after Jokowi gets Golkar support

SINGAPORE (Reuters) - Indonesian shares and currency rose on Wednesday after Jakarta Governor Joko “Jokowi” Widodo boosted his chances in the July presidential election by securing the support of the country’s second-largest political party.

The Jakarta stock exchange .JKSE rose as much as 1.0 percent to 4,971.92 points, the highest since early June last year. MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was 0.65 percent higher. At 0500 GMT, the index was 0.9 percent higher for the day.

The rupiah strengthened as much as 0.7 percent to 11,455 per dollar, its strongest since April 22, on demand from local and foreign banks. At 0500 GMT, the rupiah was up 0.6 percent. The Indonesian currency also advanced in non-deliverable forwards markets.

Jokowi’s Indonesian Democratic Party-Struggle, known as PDI-P, came first in April parliamentary elections but failed to win enough seats to nominate a president by itself, forcing it to join with other parties.

Golkar, once the political vehicle of long-time president Suharto, won 15 percent of the parliamentary vote, compared with 19 percent for PDI-P. Golkar’s chairman is business tycoon Aburizal Bakrie.

It won’t be clear until next week how many candidates there will be in the July 9 presidential vote. If there are more than two and no candidate receives 50 percent support, there will be a second round of voting in September.

“Bakrie’s support for Jokowi will help to reduce the duration of political uncertainty as there is a higher probability that there will only be one round of presidential election,” said Erwan Teguh, an analyst at CIMB Securities in Jakarta.

“The remaining parties that have not formed any coalition will be too small to come up with their own coalition,” he added.

Teguh said potential beneficiaries of a Jokowi victory include infrastructure and construction sectors as Jokowi has signalled that he would focus on these areas.

Stocks in the sectors include construction firms PT Wijaya Karya (WIKA.JK) and PT Adhi Karya (ADHI.JK) as well as cement-makers PT Holcim Indonesia (SMCB.JK) and PT Semen Indonesia (SMGR.JK).

Some analysts cautioned that even if Jokowi wins, he will have to secure the legislature’s support to deal with problems such as a persistent current-account deficit, slowing economic growth and an over-dependence on commodities.

Last week, Indonesia’s central bank slashed its economic growth outlook this year to the weakest level since the 2009 global financial crisis due to a drop in commodity exports. Bank Indonesia projected growth of 5.1-5.5 percent, down from its previous estimate of 5.5-5.9 percent.

“We think Jokowi’s track record looks encouraging, by and large - but a quick panacea for Indonesia’s macro rebalancing process is unlikely,” Morgan Stanley said in an April report.

The bank said expectations of reforms “must be realistically weighed” and take into the account the dynamics between the new president and other political players.

Additional reporting by Jongwoo Cheon; Editing by Chris Gallagher and Richard Borsuk

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