While most Asian stock indices were in the red zone on Friday (02/12), Indonesian stocks bucked the trend. Indonesia's benchmark Jakarta Composite Index rose 0.91 percent to 5,245.96 points, while the Indonesian rupiah appreciated 0.39 percent to IDR 13,512 per US dollar (Bloomberg Dollar Index). While global investors were cautious ahead of the new US payroll data (to be released later on Friday), domestic investors poured money into Indonesian stocks. What explains this performance today?
Just like we saw in the last couple of weeks, foreign investors continued to sell Indonesian stocks on Friday (02/12) amid expectations of a stronger US economy (with rising inflation) and a Federal Reserve interest rate hike. On Friday foreigners sold IDR 276 billion (approx. USD $20 million) worth of shares more than they purchased, according to data from the local stock exchange.
Therefore, the 0.91 percent increase of the benchmark Jakarta Composite Index on Friday was due to appetite of local investors, possibly a sort of relief rally after the anti-Ahok demonstration in Jakarta passed by without real problems. On Friday (02/12) there was again a massive demonstration staged in Jakarta, possibly joined by 150,000 people, in which protesters demanded the immediate arrest of Jakarta Governor Basuki Cahaya Purnama (Ahok) on grounds of insulting Koranic teachings. Prior to the demonstration (which technically did not form a demonstration but was labelled a "praying together") there existed a high degree of concern whether radicals would use the occasion to use violence (after all the previous anti-Ahok protest rally had ended in chaos on 4 November 2016).
One big difference between Friday's "praying together" and the demonstration on 4 November was that Indonesian President Joko Widodo, this time, agreed to show his face. Widodo in fact spoke to the crowd at Monas in Central Jakarta and thanked the people for a peaceful gathering. Protesters heavily criticized Widodo after the latter refused to meet or communicate with protesters at the November demonstration (moreover he is considered a close ally of Ahok). However, his appearance at Monas on Friday sent a strong signal of unity and stability in Indonesia.
Ahok's blasphemy trial will start - and conclude - soon. Given the blasphemy allegiations are based on a manipulated video, it is highly unlikely the Jakarta Governor will be found guilty by the Jakarta court. If indeed found not guilty, there is still a real chance of seeing unrest in Indonesia's capital city of Jakarta as protesters may not accept this verdict.
This week Indonesia's Jakarta Composite Index climbed 2.63 percent, the highest weekly gain since the week ended on 5 August 2016, and the benchmark index is now touching its highest position since 14 November 2016. On Friday the financial and trade sectors performed particularly well.
Outside Indonesia, Asian stocks were plagued by some concern about the true implementation of the recent OPEC oil output deal. Trimegah Securities released a report which notes "traders doubt whether the OPEC deal will suffice to ease the crude oil glut as it may only draw more supplies from storage tanks and more crude shipments from the USA". The oil price fell sharply on Friday after Brent had touched a 16-month high on the preceding day.