Little noticed in the mess overnight, is a tremendous drop in Jakarta Composite Index, to the tune of 8.9%. While many may say - "Indonesia? Who cares?", this has been possibly the best performing market the past 3 years. Even as other Asian markets -- especially India and China, have suffered through 2011, Indonesia has been essentially teflon, until the past few weeks. And this comes off incredibe results in 2009 and 2010.
Seeing such a large drop in this "risk on" market is another canary in the coal mine. Much like gold, it appears this has become a very crowded trade - and now many lemmings appear to be trying to run out of the same door.
- Indonesia stocks plunged by the most since October 2008 as overseas investors cut holdings, while the rupiah rallied from a one-year low after the central bank said it will intervene to slow the currency’s drop.
- The Jakarta Composite Index (JCI) sank 8.9 percent to 3,369.14 at the 4 p.m. local-time close as investors sold riskier assets amid concern global economic growth will slow. The gauge has tumbled 19.7 percent from a record high on Aug. 1.
- “Investors are afraid that if they don’t sell now, shares will plunge further given the worsening condition of the global economy,” said Soni Wibowo, who helps manage $1.98 billion at PT Bahana TCW Investment Management in Jakarta. “Risk aversion has risen.
- Indonesian stocks are the most “crowded” trade this year on a net-foreign-buying basis, Credit Suisse Group AG said in a report this week.
- The rupiah is still the best performer among the 10 most- active currencies in Asia outside of Japan since end-2008, having gained 20 percent, according to data compiled by Bloomberg.
- “Foreign investors are dumping local assets,” said Akbar Syarief, who helps manage $98 million in assets at PT MNC Asset Management in Jakarta. “They’re seeking the safety of U.S. Treasuries while waiting out developments in the U.S. and in Europe.”
Disclosure: No position