EMERGING MARKETS-Rupiah steadies, stocks slide as Bank Indonesia holds fire

  • Reuters
  • Stock Market News
EMERGING MARKETS-Rupiah steadies, stocks slide as Bank Indonesia holds fire
Credit: © Reuters.

* Graphic: World FX rates http://tmsnrt.rs/2egbfVh

* Graphic: Foreign flows into Asian stocks https://tmsnrt.rs/3lKhL5I

* Bank Indonesia keeps interest rates unchanged

* Taiwan dollar eyes best day in nearly six months

By Shashwat Awasthi

Sept 17 (Reuters) - Indonesia's rupiah was flat while Jakarta's stock market hit session lows on Thursday after the country's central bank as expected kept interest rates unchanged in favour of maintaining stability in the currency.

Bank Indonesia (BI) called the rupiah IDR= "fundamentally undervalued", saying there was room for the currency to strengthen, while also assuring markets that its debt-sharing agreement with the government was only for 2020. to BI in a list of several emerging markets, S&P Global said in a report this week that developing world central banks could risk their reputations, sovereign credit ratings and even full-blown economic crises if they continue to monetise government debt after the crisis. decision to leave rates unchanged "shows that it is prioritising financial stability over supporting the economy", said Gareth Leather, senior Asia economist at research firm Capital Economics.

"Our forecast is that the rupiah should start to stabilise over the coming months, but the country's current account deficit means the rupiah is likely to remain more volatile than other Asian currencies."

Concerns over moves to change the central bank's mandate and institutional arrangements have threatened local bond markets and the stability of the rupiah, prompting a series of interventions by the central bank in recent weeks. The currency is down 6% this year.

Officials have hinted that some of the proposed changes for the bank will fall by the wayside, but investors remain nervous about ministers' potential influence over policymaking at a time when it is underwriting government debt issues under coronavirus emergency measures.

Stuart Ritson, an emerging market debt portfolio manager at Aviva (LON: AV ) Investors, said foreign flows into Indonesian bonds had been "very lacklustre" since the coronavirus crisis.

"Certainly, headlines like we've seen over the past few weeks which do question central bank independence are likely to see investors be more cautious about allocating capital toward Indonesia," Ritson said.

A Reuters poll showed investors were short on the rupiah, scaling back bets just two weeks after turning bullish for the first time since June. other emerging Asian currencies were lower as the dollar found support in Fed Chair Jerome Powell's forecast that the world's largest economy would shrink less than feared this year. dollar TWD=TP was a major outlier as it advanced for a sixth straight day and hit its highest level since April 2018.

The Bank of Japan also kept its monetary policy steady on Thursday and slightly upgraded its view on the economy. FTSE Strait Times Index .STI climbed as much as 0.5% after higher-than-expected August exports, before reversing course to join its peers in the red.

HIGHLIGHTS:

** Indonesian 10-year benchmark yields are up 4.2 basis points at 6.957%

** Top losers on the Jakarta stock index include Argo Pantes ARGO.JK down 6.94%, Protech Mitra Perkasa OASA.JK down 6.91% and Inter Delta INTD.JK down 6.86%

Asia stock indexes and currencies at 0805 GMT

COUNTRY

FX RIC

FX DAILY %

FX YTD %

INDEX STOCKS DAILY % STOCKS YTD %

Japan

JPY=

+0.14

+3.65

.N225

-0.67

-1.43

China

CNY=CFXS

-0.16

+2.91

.SSEC

-0.41

7.22

India

INR=IN

-0.24

-3.15

.NSEI

-0.69

-5.29 Indonesia

IDR=

+0.03

-6.34

.JKSE

-0.40

-20.02 Malaysia

MYR=

-0.22

-1.16

.KLSE

-1.32

-4.89 Philippines

PHP=

-0.17

+4.52

.PSI

-0.05

-23.95

S.Korea

KRW=KFTC

+0.14

-1.53

.KS11

-1.22

9.49 Singapore

SGD=

-0.10

-1.13

.STI

-0.13

-22.37

Taiwan

TWD=TP

-0.01

+2.72

.TWII

-0.80

7.30 Thailand

THB=TH

-0.19

-4.01

.SETI

-0.58

-18.60

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