Market unshaken by Cabinet reshuffle

Padangekspres.net-Investors did not pay much attention to the Cabinet reshuffle as key economic ministers remained safe.

Positive external factors continued to drive up the rupiah and stock prices on Wednesday.

The rupiah gained 0.2 percent to Rp 8,801 to the US dollar as of 4 p.m. in Jakarta, partly due to a day of net buying by foreign investors in the stock market, which saw its benchmark stock index increase 1.75 percent, or 63 points, to 3,685.


International funds, which controlled over half of the nation’s publicly traded stocks, bought a net Rp 211 billion (US$24.5 million) worth of stocks during the five-hour trading session.

“The reshuffle did not affect the financial market much, because the ministers who were replaced are not directly related to the financial industry or market, like the coordinating economic minister or finance minister,” Recapital Securities head of research Pardomuan Sihombing said.

Changes in President Susilo Bambang Yudhoyono’s major economic team were limited to trade, energy and mineral resources and state-owned enterprises. Crucially, Finance Minister Agus Martowardojo, whom global financial market investors are familiar with, stayed in the Cabinet.

“The result of the reshuffle is not that bad for investors. For now, the market has not yet reacted to the reshuffle news. The movement is driven more by the factor of the global market,” Finan Corporindo Nusa president director Edwin Sinaga said.

Global markets rose on Wednesday as investors hoped that European leaders would find a quick solution to the region’s debt crisis. The United States’ Dow Jones soared 1.58 percent and the United Kingdom’s Financial Times rose 0.65 percent.

Most major stock markets across Asia also posted gains, with Japan’s Nikkei increasing 0.35 percent and Hong Kong’s Hang Seng jumping 1.29 percent, while Singapore’s Strait Times lost 0.16 percent.

“Market sentiments are still very sensitive to external movement,” Recapital’s Pardomuan said.

“As long as uncertainties remain high on European woes, the market will continue to fluctuate.”

At volatile times, Edwin said “defensive stocks” included blue chip ones, including state-run Bank Mandiri, Bank Rakyat Indonesia (BRI) and Bank Negara Indonesia (BNI), while shares of the Astra group were also considered “safe”.

According to Pardomuan, however, the heaviest “turbulence” in the financial market may have passed, though volatility will persist over the Eurozone crisis, and therefore the future trend for Indonesia’s stock market remains positive as fundamentals are strong.

“The President wants to accelerate and stimulate the domestic economy to tackle the global slowdown and capture funds that spill over from the developed nations which offer less attractive returns than those of emerging markets, including Indonesia,” Pardomuan said. “The reshuffle reflects that the President is seeing this condition.”