Prabowo faces investor revolt

JAKARTA: For months, President Prabowo Subianto’s moves to chip away at Indonesia's long-established economic guardrails have stoked anxiety in markets. Last week’s sudden rout suggests investor patience is wearing thin.

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The ex-general has been causing unease with his populist spending measures, plans to dilute the central bank’s independence and aggressive policies against foreign businesses like Apple Inc. He fast-tracked laws to expand the role of the military too, triggering angry student protests in Jakarta.

The tipping point came earlier in the week, when rumours that Finance Minister Sri Mulyani Indrawati, who has kept a tight rein on spending during her cumulative 14 years in office, would resign. The stock market dropped the most in three years on Tuesday, prompting government officials and Ms Indrawati herself to come out, one by one, to dispel the speculation. Bank Indonesia was forced to step in to protect the rupiah, Asia’s worst performing currency this year.

The rumours have “renewed fears of reformists being purged and was a catalyst for exposing all the economic problems the country is facing,” said John Foo, founder of Valverde Investment Partners Pte, which invests in Southeast Asian stocks.

While there’s been some reprieve in the markets since then, investors remain rattled by Mr Prabowo’s policy moves, coming at a time when Southeast Asia’s biggest economy is also grappling with US President Donald Trump’s tariff threats and waning demand from China for raw materials. The Jakarta Composite Index fell as

much as 2.6% on Friday, among the worst-performing stock gauges in Asia. The nation’s equities have seen net outflows of $1.9 billion this year.

Top of mind for investors is the fiscal outlook. Once cited by Morgan Stanley as one of the “Fragile Five” markets prone to wild swings in foreign sentiment, Indonesia has steadily improved its credibility with investors thanks to prudent economic management that’s lifted its credit rating out of junk status.