Indonesian Stocks, Currency Drop as Fresh Bombing Hits City

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(Bloomberg) -- Indonesia’s stocks and currency fell on Monday after a fresh explosion rocked the main police office at Surabaya, a city that was hit by a series of bombings a day earlier.

The Jakarta Composite Index fell as much as 1.7 percent before closing 0.2 percent lower and the rupiah retreated 0.1 percent to 13,970 to a dollar. The bomb exploded near the headquarters of Surabaya police, Frans Barung Mangera, a spokesman for East Java police, said in a televised address. At least 10 people, including four police officers were injured in the blast, the Associated Press reported.

At least 14 people, including 6 suicide bombers were killed and dozens injured in three separate bombings at churches in Surabaya on Sunday, according to police. The Islamic State group claimed responsibility for the attack that was carried out by six members of a family, the Jakarta Post reported.

The bombings are certain to worsen market sentiment already hit by a selloff in the currency, bonds and stocks triggered by exit of foreign investors from emerging markets amid a rising dollar and U.S. Treasury. While the rupiah tumbled last week to the lowest since December 2015, the yield on benchmark 10-year rupiah bonds jumped to a 13-month high. Stocks rebounded 2.8 percent last week after hitting their lowest since June.

“The terror attacks will hamper the already fragile investment sentiment in Indonesia, and we are witnessing it right now,” said Taye Shim, head of research at PT Mirae Asset Sekuritas Indonesia. “Given the fragile sentiment, any negative developments will push investors out of the country.”

Anti-terror Law

Indonesia has the world’s largest Muslim population and has been battling Islamic extremists since independence. Barely a week ago, the Islamic State group also claimed responsibility after six police officers and a prisoner were killed during a prison riot in the capital, Jakarta, local media reported.

The series of bombings prompted President Joko Widodo on Monday to say he will consider issuing an emergency anti-terrorism law by June that will grant more powers to police to prevent such acts. A bill to give police sweeping powers of arrest and the ability to detain suspects for up to six months, has been stuck in parliament for more than two years after Widodo asked lawmakers to expedite the passage.

Click here to read more about anti-terror law

“The latest attack will increase pressures on Indonesia’s lawmakers to expedite the anti-terror bill that is currently stalled in parliament,” said Hugo Brennan, a Jakarta-based senior Asia analyst at Verisk Maplecroft.

The bill adds offenses such as taking part in military training at home or abroad, communicating about conducting terrorist acts and joining or recruiting for a declared terrorist organization. Authorities would also be given the power to strip convicted terrorists of their passports and citizenship.

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