Ika Krismantari and Aditya Suharmoko, Jakarta – The Indonesian Composite Index slumped Tuesday to its lowest level in 17 months as investors pulled out their money over jitters that lower global commodity prices could slash economic growth.
The commodity-heavy Index dropped by 3.9 percent to 1,958.75 – the first time it fell below the 2,000 mark since April 23, 2007.
Resources-based companies dragged down the Index after crude oil sank further to its lowest level since April, bringing down prices of other commodities, including coal and crude palm oil (CPO).
PT Bumi Resources, Indonesia's largest coal producer, led the slump after retreating by 10 percent to Rp 3,950. PT Astra Agro Lestari, the biggest publicly traded CPO company, dropped by 11 percent to Rp 14,250 – its lowest level since August 2007.
HD Capital analyst Adrian Rusmana said the slump was mostly triggered by fears the economy would grow sluggishly this year as declining commodity prices erode export revenue. Indonesia, Southeast Asia's largest economy, has projected economic growth of 6 to 6.4 percent this year.
"Last week, the BPS (Central Statistics Agency) reported that we're suffering a trade deficit because our imports exceed our exports. The condition will deteriorate if commodity prices continue to fall," he said.
Bloomberg reported that palm oil fell by as much as 5 percent, to 2,346 ringgit ($681) a ton, in Malaysia on concerns that declining oil prices would ease demand for biofuels. The price was above $800 a month ago.
Oil prices slumped to $101 a barrel on Tuesday, as reported by AFP, as the market awaited oil cartel OPEC's decision on whether it would cut output.
"The market responded to falling oil prices," Danareksa Research Institute chief researcher Purbaya Yudhi Sadewa said.
The rupiah also plunged, falling to Rp 9,355 against the US dollar, from Rp 9,284 on Monday, over fears investors would continue pulling most of their "hot money" out of the stock and bond market.
In response to the turmoil, central bank deputy governor Hartadi A. Sarwono said the decline was part of the supply and demand mechanism.
"The rupiah's exchange rate (against the dollar) in the free-floating system is determined by supply and demand. Bank Indonesia will enter the market to prevent extreme volatility," he said.
On Monday, BI governor Boediono said the central bank would be ready with "ammunition" to keep the exchange rate at an acceptable level.
Boediono said he believed money would always look for a better place to grow, saying investors would shift their funds to options offering higher returns.