Tuesday’s volatility, which was triggered by rumoured changes to Indonesia’s cabinet and revisions to military law, follows news of the Indonesian government's plans to consolidate its ownership of all state-owned enterprises (SOEs) under a single investment holding company, Danantara, which reports directly to the president.
The team of analysts at UBS Group, Delwin Kurnia Limas, Devinda Paranathanthri, Jessie Ren, Philip Wyatt and Jon Gordon, are of the opinion that the worst should be over with Tuesday’s slumping and trading halt of the Jakarta Composite Index (JCI).
They write in their March 18 note: “While growing domestic risks will likely hang over Indonesian assets and induce a temporary period of capital outflows and exchange rate weakness, we do not think this bout of uncertainty will worsen into a broader crisis.”
