Talk About Risk Off: Indonesia Down 8.9% Overnight

Includes: EIDO, IDX
by: TraderMark

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.

(Click to enlarge)

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

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