Indonesia will hold its fourth-ever general elections on Wednesday (17/4), in which it will be the first time that the President, Vice President, and members of the People’s Consultative Assembly will be chosen simultaneously by eligible voters. As the headlining race for Indonesia’s presidency reaches its climax, the selected constituents are expected to spearhead the republic’s central government policies for the next 5 years ahead, impacting the nation’s social, cultural, and economic sectors significantly. In the financial sector, this year’s festival of democracy has proved bountiful for Indonesia’s ever-growing financial market.
History shows that Indonesia’s financial market’s growth increased exponentially during the year when presidential elections were held, as the Jakarta Composite Index experienced a 22% increase of gains during the 2014 presidential election and a 87% increase in 2009, as the volume of transactions also grew twofold (131,8%) during that year. Since October last year, the benchmark JCI has increased by 12 percent, with Rupiah already up by 7 percent as the odds for further Fed Rate hikes dwindles in the past months. This shows that the performance of financial and foreign exchange markets is definitely affected positively by the elections. Furthermore, the bond market will be impacted positively as well, as in 2014, when transactions of obligations in the secondary market increased by 93 BPS (basis of points).
As Indonesia selects its next leaders, the financial market remains optimistic in its preparation for growth during 2019. Hans Redeker, Analyst at Morgan Stanley, stated that investors should remain bullish on rupiah on the back of lower inflation, and keep a positive outlook on government bonds. He also sees continued foreign inflows into sovereign bonds, and forecasts three rate cuts by Bank Indonesia after the elections as inflation pressure continues to ease and current account deficit narrows. All in all, the elections of 2019 should prove to boost up the financial sector siginificantly.
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