Rupiah’s political rollercoaster: A week of surprises and shifting alliances

INDONESIA: The Indonesian rupiah’s performance against the US dollar this week appears to be heavily influenced by political sentiments, even as external pressures begin to ease.

The currency ended the previous week, concluding on Friday (1 Sept), with a slight 0.07% depreciation to Rp 15,235/US$.

However, when viewed in the broader context, the rupiah still managed to strengthen by 0.36% over the course of the week, marking an end to six consecutive weeks of negative performance.

Throughout the past week, the rupiah only weakened once, on Friday (1 Sep), while showing strong gains on other days.

The unfolding political developments have captured the attention of both investors and the public since last week, potentially impacting the rupiah’s trajectory.

The domestic political landscape heated up unexpectedly after the National Awakening Party (PKB) shifted its support to Anies Baswedan’s camp.

PKB Chairman Muhaimin Iskandar, known as Cak Imin, was even endorsed as the prospective vice-presidential candidate alongside Anies.

Notably, PKB had previously been a part of the Indonesia Maju (Advancing Indonesia) coalition supporting presidential candidate Prabowo Subianto. In several surveys, Cak Imin had been more frequently paired with Prabowo.

PKB’s alignment with Anies and Cak Imin has reshaped the coalition map, causing Prabowo’s camp to lose PKB’s support.

Prabowo Subianto will now run as the presidential candidate with the backing of the Gerinda Party, the National Mandate Party (PAN), Golkar Party, and the Gelora Party.

Anies-Baswedan’s camp has lost the support of the Democratic Party, which expressed disappointment over Agus Harimurti Yudhoyono (AHY) not being chosen as Anies’s running mate.

So far, the Prosperous Justice Party (PKS) continues to support Anies, though the final decision will be determined through the Majelis Syura meeting. Anies will also be supported by the National Democrat Party (NasDem).

The Ganjar camp still maintains the support of the United Development Party (PPP), the Indonesian Democratic Party of Struggle (PDI-Perjuangan), Perindo, and Hanura.

Apart from the shifting coalition dynamics, the nomination of Cak Imin and Anies has ignited a political feud, with politicians trading barbs.

Prabowo mentioned a growing sense of betrayal in recent times, while the founder of the Democratic Party and former President Susilo Bambang Yudhoyono (SBY) hinted at infidelity and betrayal by referring to hidden agendas.

Assessing the data from both external and domestic sources, there are no strong economic indicators anticipated by market participants for this week.

However, all eyes are on the upcoming ASEAN High-Level Conference, which is expected to command the attention of the Indonesian populace.

On another note, the Central Statistics Agency (BPS) reported that the year-on-year inflation rate in August 2023 reached 3.27%, higher than the 3.08% inflation rate in July 2023.

Jahja Setiaatmadja, President Director of PT Bank Central Asia Tbk (BCA).

Jahja Setiaatmadja, President Director of PT Bank Central Asia Tbk (BCA), also weighed in on the political scenario, suggesting that the political year presents a unique opportunity for investors.

Speaking at the BCA Wealth Summit 2023, Jahja acknowledged the lingering challenges posed by the post-pandemic global situation.

However, he emphasized Indonesia’s robust economic fundamentals, driven by consumption and business activity recovery, including in the banking sector.

“The political year is an opportunity, as historically, real sector income increases due to the abundance of circulating money. This, of course, provides comfort for investment,” Jahja stated on Monday (4 Sept).

Recognizing these opportunities, the BCA Wealth Summit 2023 provided references and recommendations for continuous asset and wealth management.

Various global sentiments, such as the expected peak in US interest rates but remaining at high levels, were also discussed during the event.

The BCA Wealth Summit 2023 saw the presence of seasoned investor Lo Kheng Hong, who shared insights on the initial stages of investing, from the importance of understanding and analyzing companies to reading market situations and sentiments, as well as the necessary mental fortitude required for investors.

Photo: Liputan6

BCA reported a high level of interest from the public, with attendance at the BCA Wealth Summit reaching 2,300 visitors, a 70% increase compared to the previous year’s event.

As the political landscape continues to evolve, Indonesia’s economic outlook remains a focal point of discussion and analysis for investors and market participants alike.