Indonesian financial markets faced significant losses on Monday, as both the stock market and currency weakened following the commencement of a major shift in ownership of state-owned enterprises to the new sovereign wealth fund, Danantara. The benchmark Jakarta Composite Index saw a sharp drop of 4.7%, marking its largest one-day fall in nearly a week, before recovering slightly to a 2.3% loss. Meanwhile, the rupiah slid 0.4% against the U.S. dollar, nearing its weakest level since 1998.
This downturn comes as the Indonesian government began transferring ownership of several prominent state companies, such as PT Telkom Indonesia and PT Krakatau Steel, to Danantara. The move, part of a previously announced plan, has sparked concerns over the growing centralization of economic decision-making under President Prabowo Subianto’s administration.
“The uncertainty surrounding the direction of economic policies under President Prabowo is unsettling investors,” said Kok Hoong Wong, head of institutional equities sales trading at Maybank Securities. He noted that the ownership transfer of state companies had contributed to this unease, further dampening investor confidence.
Danantara is set to reveal its management team on Monday, an announcement that is expected to draw significant attention from investors.
The selloff echoed a similar event on March 18, when the Jakarta Composite Index experienced a dramatic 7.1% drop—the largest intraday decline since 2011. On that day, the index triggered a circuit breaker, halting trading for 30 minutes. Despite a 14% drop this year, Indonesia’s stock market remains one of the worst performers globally.
Mohit Mirpuri, a fund manager at SGMC Capital Pte in Singapore, highlighted the impact of the upcoming long public holiday, which is expected to result in thin trading later in the week. “That makes today and tomorrow the most active sessions of the week,” he said, noting that Indonesia’s financial markets will be closed from March 28 to April 7.
The selling pressure also extended to the government bond market, where yields on 10-year notes rose by 4 basis points, increasing the risk premium investors demand to hold Indonesian debt over U.S. bonds to its highest level since September.
Foreign investors continued to retreat, with global funds selling a net $142.3 million of Indonesian equities on March 21. This marked the seventh consecutive session of outflows, bringing total withdrawals this year to over $2 billion, according to Bloomberg data.
President Prabowo’s recent actions, including the creation of the sovereign wealth fund that reports directly to him, have raised concerns about the growing concentration of political power. Additionally, a proposal to expand the central bank’s mandate has sparked fears over its independence, further intensifying worries about Indonesia’s economic future.
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