As expected Indonesian stocks as well as the rupiah weakened after the opening of trade on Monday morning (06/07). This performance is in line with the direction of other markets in Asia. The primary reason behind this performance is the result of Greece’s referendum, conducted on Sunday (05/07), in which Greek voters overwhelmingly rejected reform plans that are demanded by the country’s international creditors. This result seriously jeopardizes the future of Greece in the Eurozone.
In the referendum 61.3 percent of the voters voted against the reform plans demanded by Greece’s creditors (38.7 percent of the Greek voters approved the reform plans).
Prime Minister Alexis Tsipras, content with the result, was quoted saying that “democracy has prevailed” and “[this result] is a bright day in the history of Europe”. The result of the referendum gives Tsipras a stronger position vis-à-vis its international creditors and he still believes that a deal can be concluded within two days. The Prime Minister also added that the result does not mean that Greece wants to exit the Eurozone.
Last week, Greece became the first developed country to default on a debt repayment to the International Monetary Fund (IMF) after its international rescue package expired. Markets are now awaiting decisions of the European Central Bank (ECB) whether or not to continue disbursing emergency liquidity assistance to Greece in an effort to keep the financial system of Greece running. Over a week ago, Greek authorities implemented capital controls in order to avoid a run on banks.
As a result of global turmoil, Indonesia’s benchmark Jakarta Composite Index (IHSG) was down 0.71 percent to 4,947.51 points by 10:20 am local Jakarta time. Meanwhile, the Indonesian rupiah had depreciated 0.26 percent to IDR 13,355 per US dollar at the same time (Bloomberg Dollar Index).