Jakarta. Indonesian stocks dropped on Wednesday after parties of the Red-White coalition, which backed losing presidential candidate Prabowo Subianto, took chairmanship of the upper legislative body, raising concerns of a protracted political battle.
Foreign investors sold Rp 232 billion ($19 million) more in shares than they bought, dragging the Jakarta Composite Index down by 1.5 percent to 4,958.52 — ending a two-day advance.
The rupiah traded at 12,241 against the US dollar, 0.4 percent lower than a day earlier, according to Bank Indonesia data, while the government’s 10-year notes fell to 8.5368 percent from 8.5481 percent, data from Indonesia Bond Pricing Agency show.
Zulkifli Hasan, former forestry minister and a politician from the Red-and-White coalition gained control of the People’s Consultative Assembly in a grueling voting process on Tuesday that lasted into Wednesday morning.
Investors are growing uneasy with the opposition gaining ground to dominate the nation’s legislative bodies, a shift that could easily disrupt President-elect Joko Widodo’s program for reform.
“The power play displayed at the House today [Wednesday] led investors who initially thought the business climate would improve under Joko to now believe the exact opposite,” Poltak Sitanggang, chairman of Indonesia’s Mineral Entrepreneurs Association, said on Wednesday.
Still, the political brouhaha has yet to make an impact on domestic consumer confidence. The ANZ-Roy Morgan Indonesian Consumer Confidence Rating changed slightly from its 161.4 record high in August to 161.2 in September. The survey found 94 percent of Indonesians expect the country to benefit from an economic boom over the next five years.
“Confidence remains largely immune to a political backdrop that is turning less constructive by the day,” Glenn Maguire, Australia New Zealand Bank chief economist for the region, said in a note to clients on Wednesday, adding that he expects confidence to recede in coming months.
“With allegiances slow to coalesce around Joko and the very real possibility that [he] may not have a workable majority in Parliament, the actual implementation of new policy measures may prove to be problematic,” he said.