Indonesia Investment Chief Warns of Market Slump If Jokowi Loses

(Bloomberg) -- Indonesia’s investment chief warned of a severe sell-off in the nation’s currency and stocks if voters deliver an upset victory for the opposition in next month’s presidential election.

“If there was an election surprise, I think the markets will crash. The currency will probably crash,” Tom Lembong, chairman of Indonesia’s Investment Coordinating Board, said in an interview Monday in Jakarta.

President Joko Widodo is the favorite to win the April 17 vote, with a survey Monday showing him with a lead of almost 26 points over his rival, Prabowo Subianto. Jokowi, as the incumbent is known, defeated Subianto, a former general, in the 2014 election.

If the opposition candidate wins, he and his running mate Sandiaga Uno, “would have to move quickly to re-establish market confidence, to basically gain the market’s trust,” Lembong, who is a former banker and now a minister in Jokowi’s cabinet, said.

They would have to “disavow some of their more extreme policy positions,” such as plans to halt imports of food, he said. “They would have to make speeches citing that fiscal prudence is important, that ratings are important to them, that they want to preserve the gains we’ve made on sovereign credit ratings.”

Currency Rebound

Indonesia’s rupiah has rebounded from last year’s emerging-market rout, gaining 1.2 percent against the dollar this year. The benchmark Jakarta Composite Index is up 4.6 percent in the same period.

Investors have good reason to be wary about voter surveys, given the surprise win by U.S. President Donald Trump in 2016, the unexpected Brexit referendum result and last year’s election of Malaysian Prime Minister Mahathir Mohamad.

“The market expects continuity and stability,” Lembong said. “They can be wrong, of course.”

Lembong said investors are signaling confidence in Jokowi winning a second term with capital flowing back into Indonesia in the first three months. The economy is on track to record double-digit growth in foreign direct investment in 2019, which would be a turnaround from last year, when it fell by 8.8 percent to 392.7 trillion rupiah ($27.6 billion).

The investment chief said Jokowi’s government remains committed to opening up the economy, despite delays in overhauling foreign ownership rules.

“If we get re-elected we’re still not out of the woods,” he said. “We would have to move quickly to regain lost momentum on some of the delayed reforms such as further revisions of the negative investment list.”

To contact the reporter on this story: Karlis Salna in Jakarta at ksalna@bloomberg.net

To contact the editors responsible for this story: Nasreen Seria at nseria@bloomberg.net, Thomas Kutty Abraham

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