[JAKARTA] Investors in Indonesia had much reason for cheer as stocks saw their sharpest increase in two months on Thursday (Feb 15), a day after Defence Minister Prabowo Subianto emerged well on course for a decisive victory in the presidential election.
The Jakarta Composite Index finished 1.3 per cent higher, the most since Dec 14, and was nearing the record high of 7,403.578 points achieved in January. The markets were closed on Wednesday for the election.
The 72-year-old Prabowo declared victory on Wednesday night, just hours after a sample count of the votes by independent pollsters put him well ahead of his two rivals, who have yet to throw in the towel.
The former general – whose vice-presidential running mate Gibran Rakabuming Raka is outgoing President Joko Widodo’s eldest son – pulled in 58 per cent of the so-called “quick count” votes. These sample counts have proven to be fairly accurate in previous elections.
The official count by the Election Commission, which is much slower and will take several more days to complete, puts Prabowo on course to become president at 57 per cent with 43.8 per cent of the votes tallied. This is more than double his closest rival Anies Baswedan.
The final results are expected to be released by Mar 20.
Widodo told reporters on Thursday that he had met with Prabowo the previous evening to offer his “congratulations”.
Prabowo’s likely single-round victory – which means a run-off vote probably will not be necessary – has eased the uncertainty surrounding the election outcome that some analysts had flagged as a potential concern for investors.
David Sumual, the chief economist at Bank Central Asia, told The Business Times that Prabowo’s margin of victory was “higher than expected”. He added that a smooth transition was crucial, and that a single-round victory for Prabowo would mean that the incoming leaders will have more time to prepare before taking over the reins in October.
“In the short term, the market could react positively to the current results, given that political uncertainty has dissipated, and the likelihood of a dispute (over the election results) appears to be small,” noted Sumual.
In a report, Morgan Stanley analysts said that both Prabowo and Gibran had largely campaigned on a platform of policy continuity, adding that this would “bring the focus of investors back to the fundamentals”.
Some analysts suggested that with Prabowo’s lead being too significant to challenge, investors will be encouraged to place early bets on the market to gain momentum.
Biggest gains
Among the Indonesia Stock Exchange’s biggest gainers on Thursday were banks, nickel miners and processors, as well as infrastructure-related companies. Bank Mandiri and Bank Rakyat Indonesia rose nearly 4 per cent and 2.5 per cent, respectively.
Stocks linked to some of Indonesia’s wealthiest business leaders also soared.
Indonesian nickel producer Merdeka Battery Materials, which is owned by billionaire Garibaldi Thohir, saw its share price go up by 14.4 per cent at the start of trading on Thursday, before closing 7.2 per cent higher. The company raised 8.75 trillion rupiah (S$755.6 million) when it went public last year, making it the third-biggest initial public offering (IPO) in Indonesia in 2023.
Thohir, who also owns listed coal company Adaro Group, has openly endorsed Prabowo at several of his campaign rallies.
Shares of property developer Pakuwon Jati were up by nearly 3.4 per cent. The company owned by real estate tycoon Alexander Tedja last year invested 5 trillion rupiah to build a new commercial zone in Nusantara, which is set to become Indonesia’s new capital.
Prabowo has pledged to continue Widodo’s policies of massive infrastructure spending, which includes the construction of Indonesia’s new capital and positioning the country as a regional electric-vehicle manufacturing hub.
“There’s a positive sentiment for stocks associated with the Prabowo-Gibran pair, as they have vowed to continue Widodo’s legacy,” said Edi Chandren, an investment analyst lead at brokerage Stockbit.
The rupiah weakened slightly by 0.2 per cent against the US dollar to 15,613 as at 8 pm (Singapore time), after briefly touching a one-month high of 15,545 earlier on Thursday.
CitiGroup analysts Ferry Wong and Ryan Davis wrote in a note that market expectations of policy continuity will likely help to stabilise the rupiah in the medium term.
The decisive result of the election could also spur more companies to hold IPOs later this year, chief executive of Schroders Investment Management Michael Tjoajadi told BT.
He said that there could be some medium to large-sized IPOs in the second quarter, which would give a timely boost to Indonesia’s aspirations to be a listing hub after being one of Asia’s busiest markets in 2023. “There are companies that are clearly willing to go public, with some consumer and energy-related names expected to list,” he added.
Well-wishes from abroad
Singapore Prime Minister Lee Hsien Loong called Widodo on Thursday to congratulate him on the “smooth and successful” conduct of the presidential and legislative elections.
PM Lee’s press secretary told reporters that he also called Prabowo to congratulate him on his “strong performance” in the election. “Both leaders discussed the excellent state of bilateral relations, and agreed on the importance of identifying new and mutually beneficial areas of cooperation,” said the press secretary.
Australian Foreign Minister Penny Wong was quoted as telling a Senate hearing that Canberra looked “forward to working closely with (Indonesia’s) next president” when he is inaugurated in October.
The US also congratulated Indonesians for their “robust turnout” in the election. “This vote was a testament to the durability and strength of the Indonesian people’s commitment to the democratic process and electoral institutions,” said a statement from the State Department.
