Indonesian Stocks, Bonds Drop on Concern Over Budget-Deficit Cap

owd7dkrucyd}6zmkc39ri0qr_media_dl_1.png BloombergArticle content(Bloomberg) — Indonesia’s stocks and government bonds fell on concern Prabowo Subianto’s administration is moving closer to removing the long-held deficit ceiling for the state budget.Sign In or Create an AccountEmail AddressContinueor View more offersArticle contentThe Jakarta Composite Index of shares slid as much as 3.1% to an eight-month low after ministers said in a cabinet meeting on the weekend that the budget deficit limit of 3% of gross domestic product is difficult to maintain as the Iran war pushes up oil prices. Prabowo said he would only consider temporarily exceeding the deficit cap for emergency situations, speaking in an interview with Bloomberg on Saturday.Article contentWe apologize, but this video has failed to load.Try refreshing your browser, ortap here to see other videos from our team.Article contentArticle content“They’re saying the 3% budget deficit cap is hard to keep,” said John Foo, founder of Valverde Investment Partners Pte. in Singapore. “Something has to give. You either increase the gap, or cut back on growth. Whatever happens, it’s not good.”Article contentTop StoriesGet the latest headlines, breaking news and columns.There was an error, please provide a valid email address.Sign UpBy signing up you consent to receive the above newsletter from Postmedia Network Inc.Thanks for signing up!A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.Article contentTransport and property stocks were among the biggest losers in the benchmark index, which is heading for a fourth day of losses. The nation’s 10-year bond yield jumped 11 basis points to its highest level in 10 months, while the rupiah weakened 0.2% to 16,985 per dollar.Article contentHere are some comments from analysts about Indonesian assets and its fiscal situation.Article contentFelix Darmawan, Panin Sekuritas Article content“The surge in oil prices could add strain to the fiscal outlook if it stays above the levels assumed in the state budget”With the long Eid holiday period coming up, investors tend to hold back and wait for clearer signals, which adds to the selling pressure“Transaction value has been noticeably lower in the past few days and the market feels quieter than usual, another sign that investors are stepping back and waiting for clarity”Article contentSuryaputra Wijaksana, PT UOB Kay Hian Sekuritas IndonesiaArticle contentArticle content“For fixed-income investors, yield risk is materializing” and foreign outflows from bonds are intensifying and could accelerate if global risk sentiment deteriorates further“The combination of rising global yields, worsening risk perception following outlook downgrades from rating agencies and higher supply suggests a challenging backdrop for government bonds in the near term”Article contentMohit Mirpuri, SGMC Capital Partner Pte.Article content“The JCI is lagging regional peers mainly due to thin liquidity and cautious positioning ahead of the upcoming long holiday period” as investors are reluctant to commit fresh money when markets will be shut for a week and global risks remain elevated“Sentiment is also weighed down by lingering MSCI concerns, the expected release of shareholder concentration disclosures, and headlines around fiscal deficit risks”Volatility is likely to remain elevated in the near termArticle contentAri Jahja, Macquarie CapitalArticle content“Feedback from investors suggest that they would be more supportive of the fiscal reallocation path compared to a more immediate deficit cap removal scenario”The combination of a weak rupiah and high energy costs may trigger a hawkish stance from Bank of Indonesia to curb imported inflation“We recommend investors stay defensive in this volatile environment”Article content—With assistance from Abhishek Vishnoi, Grace Sihombing, Bernadette Toh and Gabrielle Ng.Article contentTrending Bank of Canada more likely to cut than hike after 'brutal' jobs report, say economists Economy Canadians’ average wealth hit $1.07 million, but what’s driving net worth depends on your age, province and bracket Wealth Posthaste: Oil supply shock could force the Bank of Canada's hand yet News Trump Demands Help From Other Countries to Secure Hormuz PMN Business This TSX stock has 30% upside on the company's $11 billion project backlog, analyst says Investor Share this article in your social networkCommentsYou must be logged in to join the discussion or read more comments.Create an AccountSign in Join the Conversation Postmedia is committed to maintaining a lively but civil forum for discussion. Please keep comments relevant and respectful. Comments may take up to an hour to appear on the site. You will receive an email if there is a reply to your comment, an update to a thread you follow or if a user you follow comments. Visit our Community Guidelines for more information. Bank of Canada more likely to cut than hike after 'brutal' jobs report, say economists Economy Canadians’ average wealth hit $1.07 million, but what’s driving net worth depends on your age, province and bracket Wealth Posthaste: Oil supply shock could force the Bank of Canada's hand yet News Trump Demands Help From Other Countries to Secure Hormuz PMN Business This TSX stock has 30% upside on the company's $11 billion project backlog, analyst says Investor