Tuesday, December 6

Indonesian rupiah gains, stocks drop as GDP fuels rate hike view


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Indonesia’s rupiah gained for a second

straight session on Tuesday, a day after the country reported

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its fastest pace of growth in more than a year, while stocks

lagged broader Asia on the prospect of more interest rate hikes

by its central bank.

Southeast Asia’s largest economy, which reported

third-quarter growth figures on Monday, has seen its currency

gain 0.4% since then. The rupiah is still down nearly 10%

against the US dollar this year.

“The growth outlook is a bit more cloudy, but I think in

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Indonesia the economy can hold up relatively well and that’s

because Indonesia is much more dependent on domestic demand than

on external demand,” said Alvin Tan, head of Asia FX strategy at

RBC Capital Markets.

Jakarta’s main stock index dipped 0.4% after three

days of gains as analysts predicted strong growth may embolden

Bank Indonesia (BI) to raise rates aggressively as it follows

other global central banks in trying to curb surging inflation.

Kunal Kundu, an analyst at Societe Generale, predicted a

“perfect storm” for Indonesia next year as commodity prices

drop, the government reverts to the budget deficit’s legal limit

of 3% of GDP, and BI stops debt monetisation.

“Even though the growth rate will likely drop over the next

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few quarters, we expect BI to raise the policy rate by an

additional 100 basis points in the face of an aggressive Fed

with a higher-than-expected terminal policy rate,” Kundu said.

Most other Asian currencies rose, with Thailand’s baht

up for a third straight session, as hopes that China

would ease its stringent COVID-19 curbs supported broader market

sentiment and hit the dollar.

Regional equities were also mostly higher, with Taiwanese

shares adding close to a percent, South Korea’s KOSPI

up 1.1%, and Thai shares gaining 0.6%.

Khoon Goh, head of Asia research at ANZ, said markets traded

positively on hopes of China reopening despite officials over

the weekend reaffirming a zero-COVID strategy.

“I think markets are of the view that the worst is probably

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past,” Goh said.

China will improve the its COVID prevention policy operates

to make it easier for people to travel to and from the capital

city, a government official said on Monday.

In the Philippines, the peso appreciated 0.6% after

incurring losses on Monday. The nation’s unemployment rate eased

for a third month in a row in September and fell to a new low

since the COVID-19 pandemic began.

HIGHLIGHTS:

** BOJ debated impact of future exit from easy policy amid

rising prices

** Guangzhou’s COVID outbreak deepens as more lockdowns loom

in China

** Vietnam central bank chief says it can provide liquidity

to the banking system

Asia stock indexes and

currencies at 0342 GMT

COUNTRY FX RIC FX FX INDE STOCKS STOCKS

DAILY % YTD % X DAILY YTD %

%

Japan -0.02 -21.5 <.n2>

China 9 EC>

India 0.00 -9.27 <.ns ei>

Indonesi +0.16 -9.12 <.jk a se>

Malaysia -0.04 -12.1 <.kl se>

Philippi +0.55 -12.2 <.ps nes i>

S.Korea 1 11>

Singapore -0.09 -3.76 <.st e i>

Taiwan +0.20 -13.5 <.tw ii>

Thailand +0.20 -10.4 <.se ti>

(Reporting by Jaskiran Singh in Bengaluru, additional reporting

by Navya Mittal)

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