Initially we were concerned that Indonesia’s benchmark stock index (Jakarta Composite Index) would experience a sudden change of direction - after two days of strong gains at the start of the week - because the preliminary results of the 2014 Indonesian presidential election (based on unofficial quick counts) was mixed at first glance and thus triggers political uncertainty (something which is seriously disliked by investors). However, the index performed remarkably well and rose 1.46 percent to 5,098.11 points on Thursday (10/07).
Investors are well aware that there are credible quick count results (which have proven track records evidenced by results in previous elections) and there are those quick count results that are manipulated to create a certain outcome. Indonesia’s credible quick count results all point to one winner: market-favorite and reform-minded Joko Widodo (Jokowi). Moreover, these quick counts all indicate a similar margin between Jokowi and rival presidential candidate Prabowo Subianto of about five percentage points.
On Wednesday afternoon a confusing situation occurred when both candidates declared a victory in separate press conferences (basing their claims on different quick counts). But due to the unofficial nature of these quick counts we will have to wait until 22 July to learn the official result (announced by the General Elections Commission, KPU), or, in case of a legal dispute (which would not be a surprise), the Constitutional Court will give its verdict in August. Therefore, political uncertainty as well as social tensions remain.
The Jakarta Composite Index was also supported by the appreciating rupiah exchange rate. Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) appreciated 1.25 percent to IDR 11,549 against the US dollar:
Market participants were also content to see that Bank Indonesia left its interest rate policy unchanged at today’s Board of Governor’s Meeting.