Indonesia Halts Stock Trading After 10 Percent Plunge

By Berni Moestafa
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Oct. 8 (Bloomberg) -- Indonesia's stock exchange halted share-market trading for the first time in eight years after the benchmark index plunged 10 percent, the biggest decline since the 1998 Asian financial crisis.

Trading was suspended indefinitely, the exchange said in an e-mailed statement. The Jakarta Composite Index plummeted the most in Asia, where credit market turmoil drove the MSCI Asia Pacific Index to its biggest loss since 1990. Almost a quarter of Indonesian shares fell at least 10 percent as lending costs rose to near a two-year high.

Bonds and the rupiah declined, while the cost to protect government debt from default rose to the highest level since at least 2004. The benchmark stock index is down 21 percent this week, the worst weekly drop since at least April 1983, data compiled by Bloomberg showed. It has fallen 47 percent this year.

``It's justified for us to suspend'' trading if the index falls more than 20 percent in just three days, Ahmad Fuad Rahmany, chairman of the Capital Market and Financial Institutions Supervisory Agency said in a mobile-phone text message. ``Under an irrational market situation, we can't let the market mechanism govern stock prices in a disorderly manner.''

Exchange officials will meet market participants today to decide whether to extend the suspension tomorrow, said Erry Firmansyah, president director of the bourse. The exchange is ``looking into'' the cause of the market slump, he said.

Indonesia is battling rising inflation at a time when the global credit crisis may slow exports. The country's central bank raised its key interest rate yesterday by a quarter-basis point to 9.5 percent after inflation accelerated to 12.1 percent.

Global Uncertainty

``People are panicking,'' said Suherman Santikno, head of research at Jakarta-based PT Batavia Prosperindo Sekuritas, which manages about $573 million in assets. ``With uncertainty in the global economy, it's best to hold cash.''

Indonesian authorities last halted trading of the country's shares in September 2000, when a bomb exploded in the exchange building's car park, killing 15 people.

PT Astra International, Indonesia's largest auto retailer, tumbled 20 percent to 12,800 rupiah and PT Indosat, the nation's second-biggest telephone company, fell 23 percent to 3,950 rupiah. PT Adaro Energy, Indonesia's second-largest coal producer, plunged 19 percent to 810 rupiah.


The rupiah dropped 1 percent to 9,658 per dollar at 5:26 p.m. local time, paring a decline of 2 percent on speculation the central bank sold dollars.

``They sold dollars at 9,700,'' said Joanna Tan, an economist at Forecast Singapore Pte.

Bonds Drop

Ten-year government bonds tumbled, the biggest fluctuation of any government debt market today. The yield on the 9 percent note due September 2018 rose to 14.56 percent, compared with 12.95 percent yesterday, according to closing prices at the Inter Dealer Market Association. The price fell 7.0000, or 70,000 rupiah per 1 million rupiah face amount, to 71.250. A basis point is 0.01 percentage points.

Stocks also fell after commodity prices continued to slump as investors exit leveraged bets and slowing growth cuts demand for raw materials.

PT Astra Agro Lestari, Indonesia's biggest publicly listed plantation company, retreated 15 percent to 8,400 rupiah and PT International Nickel Indonesia, the nation's largest producer of the metal, slid 13 percent to 2,250 rupiah.

The value of the 19 commodities in the Reuters-Jefferies CRB Index dropped 43 percent from its July 3 peak through Oct. 6, data compiled by Bloomberg show. Crude oil slid to its lowest since Feb. 7 today, while palm oil lost 57 percent from its March 3 record and nickel fell 60 percent from its May 2007 record.

`Speculative Money'

``Too much of the Indonesian market is tied to commodities,'' said Kim Yong Tae, head of overseas investment at Yurie Asset Management Inc. in Seoul, which has the equivalent of $1.2 billion in equity assets. ``Also, the currency is very weak, suggesting that a lot of speculative money is pulling out of the market.''

Credit-default swap contracts on Indonesia jumped 80 basis points to 560 at 2 p.m. in Singapore, Barclays Capital prices show. The default swaps rose to 522.5 basis points on Oct. 6, the highest in more than four years, according to CMA Datavision, whose prices go back to 2004.

The three-month rate at which Indonesian banks charge each other for loans rose a fifth of a percentage point today to 11.17 percent, near the highest since October 2006.

To contact the reporter on this story: Berni Moestafa in Jakarta at bmoestafa@bloomberg.net