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SINGAPORE: A slide in Indonesian equities is evoking memories of the market crises in Southeast Asia in the depths of the March fade.
Regional stocks fell after Jakarta’s surprise return to a lockdown sent Indonesian stocks down 5% on Thursday before triggering a brief halt in trading.
The volatility continued on Friday as the Jakarta Composite Index erased a loss of up to 2.8% in the first 20 minutes of trading. Some market participants are concerned that such a move could further scare off foreign funds that have been selling Asean shares at an exceptional rate.
International investors have sold more than $ 17 billion of shares in major markets in Southeast Asia this year, set for its biggest annual withdrawal in at least a decade, according to data compiled by Bloomberg. The reintroduction of stricter measures to combat Covid-19 may exacerbate those departures by dashing hopes that a floor has been reached in economic activity.
“Southeast Asia in general and Indonesia in particular will now go lower on foreign investor screens,” said Nirgunan Tiruchelvam, Tellimer’s head of consumer capital research. “Even the most discerning investor would not have thought of re-imposing strict closures.”
As tech and growth stocks are a favorite this year among investors as consumers and businesses move online, Southeast Asia, which is loaded with cyclical stocks, has fallen off the radar of global investors. . Sellers have continued to rack up even as calls for a rotation to price the stocks grow louder after the Federal Reserve signaled a higher tolerance for inflation.
No notable turnover has yet been seen in Asean shares, even as they trade near their cheapest valuations relative to global equities, according to data compiled by Bloomberg.
“A value trade will not resonate in Southeast Asia unless the global technology story explodes,” Tiruchelvam said.
To be sure, a successful launch of a coronavirus vaccine can provide some support for Asean’s battered cyclical actions.
Several equity markets in the region have fallen more than 20% during the year, placing them among the worst performing in the world. Malaysia fared better with a 6.4% drop, bolstered by the meteoric rebound in glove manufacturers.
Thursday’s market reaction to the Covid-19 restrictions “outlines the concerns here, both of the risks surrounding the dent in economic and financial conditions as well as the overall theme of the lingering health implications,” Jingyi Pan said. , Strategist for IG Asia Pte. – Bloomberg
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