Emerging markets: Indonesia stocks fall 2% on virus surge, yields hit two-month high

A woman receives a shot of Sinovac Covid-19 vaccine during a mass vaccination at Putri Hijau Military Hospital in Medan, North Sumatra, Indonesia, Friday, June 18, 2021. Indonesia's president ordered authorities to speed up the country's vaccination campaign as the World Health Organization warned of the need to increase social restrictions in the country amid a fresh surge of coronavirus infections caused by worrisome variants. - AP

JAKARTA, June 18 (Reuters): Indonesian stocks slid nearly 2% and the rupiah weakened on Friday as surging Covid-19 cases sapped risk appetite and squashed hopes that the central bank's accommodative stance would allow equity markets to recover.

South Korea's won fell for the fifth consecutive day in its worst week since March 2020, while other regional currencies were mixed, as investors further digested the US Federal Reserve's hawkish signals this week.

Jakarta's equity index shed as much as 1.9% and was set for its first weekly drop in four after Indonesia on Thursday reported its biggest daily rise in coronavirus cases since late-January.

Yields on Indonesia's 10-year benchmark bonds climbed 8.5 basis points to a two-month high.

"New Covid-19 infections are rising rapidly again... Hospital occupancy rates have surpassed 75% in the capital, Jakarta, raising the prospect that restrictions will need to be tightened," said Gareth Leather, senior Asia economist at Capital Economics.

The rupiah weakened for the fifth straight session and was on track to lose 1% this week as Bank Indonesia's dovish stance and the Fed's indication of raising rates earlier than expected heaped pressure on the currency.

Further complicating matters was news that hundreds of doctors and medical workers in Indonesia had been infected despite being inoculated, while analysts have also highlighted the slow pace of vaccinations.

The US Fed's sudden turn on Wednesday prompted Morgan Stanley analysts to recommend cashing out of long positions in many Asian currencies, including the rupiah and the Malaysian ringgit, as their appeal for carry trade was dented.

"The most important reason why we have been recommending carry trades in Asia was a patient/dovish Fed... Now the conditions have changed materially on the back of a hawkish surprise from the Fed," they said in a note.

Riskier currencies, such as those of emerging markets, thrive on U.S. interest rates remaining low because they benefit from the interest rate differential that increases their appeal for carry trade.

Philippine shares continued to unwind some of the more than 11% gain accumulated in recent weeks and fell half a per cent. - Reuters

Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 46
Cxense type: free
User access status: 3
Join our Telegram channel to get our Evening Alerts and breaking news highlights

Next In Aseanplus News

Asean News Headlines at 10pm on Monday (Aug 2)
106 new locally transmitted Covid-19 cases in Singapore, including 25 unlinked
Indonesia Covid-19 cases still soaring as govt extends activity restrictions until Aug 9; health workers to get third dose
Thailand sets goal to accelerate vaccination in August; 17,970 new Covid-19 cases confirmed on Monday (Aug 2)
Philippines DOH says Delta variant is on the rise as country logs 8,167 new Covid-19 cases on Monday (Aug 2)
Hanoi tell residents cannot leave city as Covid-19 cases keeps soaring and Vietnam reports 7,455 new cases
Thailand steps up home isolation as Covid-19 cases strain hospitals
Philippines to extend night curfew in Manila amid Covid-19 surge
Singapore advises citizens to leave Myanmar as situation remains volatile
Cambodia succeeds in training dogs to sniff out Covid-19, says top official

Stories You'll Enjoy