The benchmark stock index of Indonesia (Jakarta Composite Index, or IHSG) may reach a new record high level this week after market favourite Joko Widodo - popularly known as Jokowi - was officially announced the winner of the 2014 presidential election by the General Elections Commission (KPU) on Tuesday (22/07). Not unimportantly, the final decision was not accompanied by any riots or social unrest Jakarta or other parts of the Archipelago, thus giving investors some more peace of mind regarding the stability of Indonesian assets.
On the morning after the final election result, the Jakarta Composite Index had climbed 1.07 percent to 5,138.09 points by 10:19 am local Jakarta time. The performance of the Indonesian rupiah exchange rate also provided positive sentiments for Indonesian stocks. According to the Bloomberg Dollar Index, the rupiah had appreciated 0.95 percent to IDR 11,496 per US dollar by the same time.
Joko Widodo and his running mate Jusuf Kalla (Indonesia’s next vice-president) won the election by 53.15 percent to 46.85 percent. During yesterday’s trading day, markets suddenly plunged when it became known that defeated candidate Prabowo Subianto would not acknowledge the outcome of the KPU, claiming that the final result was influenced by violations and fraud. For investors this was a sign to engage in profit taking as Subianto’s reaction implied political uncertainties and could increase chances of riots or violence. It remains unknown whether Subianto will challenge the election result at the country’s Constitutional Court.
However, as there were no reports of violence, investors were confident about investing in Indonesian assets on Wednesday. All sectors within the Jakarta Composite Index were up on Wednesday morning, led by basic industries (+1.61 percent), trade (+1.46 percent) and mining (+1.37 percent).
The Jakarta Composite Index is also supported by higher stock indices on Wall Street yesterday after several corporate earnings of big companies were well received (for example Chipotle Mexican Grill and Comcast recorded better-than-expected earnings). The Dow Jones Industrial Average rose 0.4 percent, Standard & Poor’s 500 Index rose 0.5 percent, and the Nasdaq Composite rose 0.7 percent on Tuesday.