Shares, rupiah gain as Prabowo rejected

JAKARTA. Investors and industry representatives on Thursday responded positively to the Constitutional Court ruling that dismissed Prabowo Subianto’s challenge to the presidential election result.

The rupiah strengthened and the Jakarta Composite Index (JCI) rallied as investors entered the market for late trading before the court formally announced its dismissal of Prabowo’s legal challenge.

The rupiah strengthened 0.1 percent to 11,692 per US dollar, according to prices from local banks compiled by Bloomberg, while the JCI passed the 5,200 barrier for the first time this year.

The currency rebounded after it fell to as low as 11,743 in the afternoon following reports of minor clashes occurring in front of the court building in Central Jakarta, with police firing tear gas and using water cannons against supporters of defeated presidential candidate Prabowo.

In the equity market, foreign investors posted a new buy of Rp 409 billion (US$34.9 million) on Thursday, pushing up the JCI by 0.3 percent to close at 5,206, the highest level since May of last year.

“Movement in the equity market today was greatly affected by the court’s ruling,” said Ridwan Soetedja, a director with Panin Asset Management in Jakarta. “The market saw that the situation was under control and the clashes could be managed, thus easing their concerns.”

Mohammad Anggun Indallah, the head of equity with Manulife Asset Management, predicted that the JCI would further rally to 5,400 by the end of this year, supported by optimistic views of the incoming government as well as a more certain political climate in Indonesia moving forward.

“Since Prabowo is well-funded, risk remains that protests will continue following the rejection of his claim by the court on Aug. 21, but the momentum is clearly turning against him,” noted Sean Yokota, the head of Asian strategy with Stockholm-based financial group SEB AB.

Business representatives have complained that the investment climate in Southeast Asia’s largest economy deteriorated due to political uncertainty in the wake of Prabowo’s defiant refusal to accept the outcome of this year’s presidential election.

The former lieutenant general challenged the result in the court over what he alleged to be “structural, massive and systemic fraud” during the casting of votes on July 9.

An official rejection from the court of Prabowo’s challenge paves the way for the election’s winner, Joko “Jokowi” Widodo, to officially take office as Indonesia’s seventh president on Oct. 20. Business representatives have high hopes that Jokowi will pass reforms and improve the infrastructure deficit in the country.

Indonesian Employers Association (Apindo) deputy chairman Anton Supit expressed relief over the court’s decision, saying that it would end the uncertainty and give a green light to business players, who had been adopting a “wait and see” stance that left business expansion plans in limbo.

“This is the most important ruling because what matters most for business players and investors is certainty and stability. We hope the court’s ruling can create such an atmosphere,” he said.

However, Anton added that there was still one crucial task left for Jokowi that would affect investor confidence: the appointment of Cabinet members. (Satria Sambijantoro and Linda Yulisman)