Hashim warns rupiah could weaken if MSCI issue is not resolved
Jakarta (ANTARA) – Hashim S. Djojohadikusumo, chairman of the Indonesian Chamber of Commerce and Industry (Kadin) Advisory Board, warned that the rupiah could weaken as foreign capital flows out of the country if issues concerning the Indonesian capital market in MSCI’s review are not resolved promptly.
“I’ll be frank: this is an extremely serious issue. We must not let the rupiah fall to Rp21,000 or Rp22,000 per US dollar. That would have an extraordinarily negative political impact,” Hashim said at Kadin’s National Leadership Meeting in Jakarta on Thursday.
Hashim cautioned that a potential downgrade of Indonesia’s capital market to standalone-market status could reduce domestic capital-market funding, as foreign investors might withdraw their investments.
Such outflows could also weaken the rupiah and increase the cost of servicing Indonesia’s external debt. He said this could pose a serious threat to the national economy.
“I urge my colleagues at Kadin to recognise that this is an extremely serious issue. If foreign investment leaves our stock exchange, the rupiah could weaken further,” Hashim said.
He said the issue also warranted attention because around 32.7 million Indonesians reportedly have accounts for investing in shares, according to data he had received from the Financial Services Authority (OJK).
Hashim also highlighted signs of unhealthy share-trading practices, including stock-price manipulation, saying these were among the issues attracting attention from MSCI and foreign investors.
He also pointed to the limited proportion of shares available to the public (free float) and what he considered abnormal price-to-earnings (P/E) ratios. Both areas, he said, should be addressed as Indonesia reforms its capital market.
Hashim urged businesses, including Kadin members, to support fair and transparent share trading.
“Kadin colleagues must not take part in stock-price manipulation. I believe the 32.7 million of our fellow citizens who would suffer are our friends and family,” he said.
Hashim cited a recent stock-market case in Turkey, saying similar problems should be prevented in Indonesia by strengthening supervision and compliance with capital-market rules.
He said the President had assigned him to help the government mitigate risks related to MSCI’s review and keep the capital market under control.
Hashim reiterated the government’s commitment to taking firm action against share-trading practices that violate the rules.