Indonesia downgrade hits stocks

Moody's cuts its credit rating outlook

- ANKUR BANERJEE STANLEY WIDIANTO

A man walks past a glass window reflecting stock market information at the Indonesia Stock Exchange in Jakarta on Monday.

(PHOTO: REUTERS)

Indonesian stocks and currency skidded yesterday after Moody's lowered the country’s credit rating outlook, the latest jolt in a turbulent start to the year for Southeast Asia's largest economy after an $80 billion rout of its equity market last week.

International investors have reacted nervously to President Prabowo Subianto’s attempt to ramp up Indonesia's growth to 8%, with sentiment cooling on the country due to concerns over policy uncertainty, including a widening fiscal deficit and central bank independence.

The benchmark Jakarta Composite Index tumbled nearly 3% while the rupiah dropped as much as 0.36% to 16,885 a dollar, its lowest since Jan 22 and down 1% for the year.

Stocks have fallen 4.7% for the week thus far, on top of last week's 6.9% decline.

Moody’s move to cut the outlook for Indonesia's $1.4 trillion G20 economy to negative from stable, citing reduced predictability in policymaking, came days after MSCI flagged transparency issues that triggered the market rout.