Indonesian markets cheer as Prabowo’s likely victory clears overhang

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Indonesian markets cheer as Prabowo's likely victory clears overhang © Reuters. Supporters of Indonesia’s Defence Minister and leading Presidential candidate Prabowo Subianto, and his running mate Gibran Rakabuming Raka, the eldest son of?Indonesian President Joko Widodo and current Surakarta’s Mayor, cheer during an event to watch t

By Rae Wee

SINGAPORE (Reuters) -Indonesian markets surged on Thursday before stabilising after Defence 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% 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% 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% higher, after having risen more than 2% earlier in the session, while the Indonesian rupiah reversed early gains to last trade 0.2% lower at 15,620 per dollar.

Indonesian government bonds were meanwhile little changed, with the 10-year yield last at 6.630% according to LSEG data, as investors awaited further details on the country’s new cabinet line-up and how Prabowo’s policy pledges would play out.

“We remain cautious on adding Indonesian exposure,” said Daniel Tan, portfolio manager at Singapore-based Grasshopper Asset Management.

“Prabowo’s previous remarks that he plans to fund social assistance programmes and implement his fiscal priorities through raising debt-to-GDP ratio would raise some concern among investors, given Indonesia’s past fiscal prudence.”


The world’s biggest single-day election saw nearly 259,000 candidates and 18 parties contest 20,600 posts across the archipelago of 17,000 islands, though all eyes were on the presidency and the fate of Jokowi’s legacy after a decade at the helm.

Prabowo crucially has the tacit backing of the wildly popular president, who has bet on his former rival as a continuity candidate, bolstered by the inclusion of the president’s son, Gibran Rakabuming Raka, as Prabowo’s running mate.

However, the move sowed discontent across Jokowi’s cabinet and sparked speculation of possible resignations, including from the country’s highly-regarded finance minister Sri Mulyani Indrawati, that led the currency to a three-month low in January.

In her two stints as finance minister under two presidents, Sri Mulyani won plaudits for reforming the taxation system and for her role in steering Southeast Asia’s biggest economy through the pandemic.

She is widely expected to leave her post before the new government takes charge in October, and Prabowo’s next challenge will be to pick a credible finance minister to fill her shoes.

“In the near term, we can expect little change in the country’s economic policy framework from the Jokowi to the Prabowo administrations,” said Tom Pepinsky, a professor of government and director of the Southeast Asia Program at Cornell University.

“But as always with Prabowo, one must be wary of how he would respond to disappointing or negative economic news, and his dominating performance will mean that he will assume office with a relatively free hand.”

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