Esther Samboh, Jakarta – The Indonesian stock market saw one of its steepest plunges ever on Thursday, as jittery investors dumped their equity assets over mounting fears of a repeat of the 2008 global economic crisis.
The benchmark Jakarta Composite Index (JCI) tumbled 328 points, or 8.88 percent, the highest fall since October 2008, when the collapse of Lehman Brothers caused a global financial crisis.
The index closed at its lowest level in eight months, at 3,369, after international funds sold Rp 4.59 trillion (US$523.26 million) worth of shares following the Federal Reserve's statement about the US' "significant downside risk to the economic outlook".
Amid threats of crisis contagion hitting Indonesia, capital market regulator Bapepam-LK chairwoman Nurhaida said the agency had asked the stock exchange operator to "seriously monitor" the market's movements to determine necessary steps, including a possible suspension.
Indonesia Stock Exchange (IDX) president director Ito Warsito told The Jakarta Post a suspension would be the "last resort for the bourse only if the market gets out of control due to a very bad situation".
Instead, the stock exchange can curb trading by implementing so-called "circuit breaker", which pauses trading activity for a while to give traders time to reconsider their transactions amid market volatility and massive panic sell-offs, he added.
"We are looking at the situation. If it worsens, we will have to take certain steps. The trigger this time has been the exacerbation of the financial crises in Europe and the US," said Fauzi Ichsan, a senior economist at Standard Chartered Bank Indonesia.
"The anchor had been rupiah stability. The moment the rupiah sharply weakened, foreign investors were compelled to cut their losses by selling their rupiah stocks and bonds, and instead buy US dollars."
Massive selling pressures were also seen on government bonds and the rupiah on Thursday, as yields spiked and the currency rate fell to its lowest level in a year, triggering Bank Indonesia's (BI) intervention to stabilize prices.
"Other than the regular bilateral purchases of government bonds in the secondary market, BI today also bought government bonds in an auction. From an indicative target of Rp 5 trillion, incoming bids of Rp 2.3 trillion and Rp 1.74 trillion won," BI's director for economic and monetary policy research, Perry Warjiyo, told the Post on Thursday.
The rupiah fell as much as 3.9 percent, to Rp 9,367 per US dollar, the weakest level since May last year, before recovering to Rp 9,024 after the central bank's intervention, Bloomberg reported.
From Sept. 9 to 21, foreign holdings in government bonds dropped by Rp 18.42 trillion, according to data from the Finance Ministry's debt management office.
Yields for the benchmark 10-year government bonds also increased by more than 100 points during the same period, according to data from the Himdasun trader association.
If the benchmark yields continue to spike, government and corporate borrowing costs will jump, straining the state budget and, in turn, disrupting the real sector, as companies' balance sheets will be hit hard.
Coordinating Minister for the Economy Hatta Rajasa calmed investors and urged them not to be "overly worried", reiterating Indonesia's readied policy responses for financial market sell-offs, and its good economic fundamentals, with higher growth than many other nations around the world.
Asian stocks mostly tumbled, sending the regional benchmark index toward its lowest close in more than a year.
The MSCI Asia Pacific Index slumped 3.7 percent to 113.52 as of 5:02 p.m. local time on Tuesday; Japan's Nikkei 225 Stock Average fell 2.1 percent; and Australia's S&P/ASX 200 Index declined 2.6 percent. New Zealand's NZX 50 Index was little changed after a report showed the nation's economy almost stalled last quarter. South Korea's Kospi Index lost 2.9 percent, while Hong Kong's Hang Seng Index slumped by 4.9 percent.