JAKARTA: Indonesian Finance Minister Sri Mulyani Indrawati said on Tuesday that authorities are prepared to use all the measures they implemented during the 2008 global financial crisis to stabilise financial markets.
The options include buying back government bonds, Indrawati told reporters.
Indonesia’s high-yielding assets are among the most attractive in emerging markets but with foreigners accounting for around 38% of holdings in government bonds, they are vulnerable to outflows.
“We will guard the market mechanism so its integrity remains intact, while preventing excessive profit taking and excessive speculation in this abnormal situation,” she said.
“Bank Indonesia is buying government bonds from the secondary market, and we will collaborate in this,” she added.
The minister said the recent dive in global markets due to plunging oil prices and coronavirus fears had been “extraordinary” and said the government will move to prevent it from hurting Indonesia’s economy.
Indonesia’s main stock index on Monday posted its biggest single day drop since 2011 amid a global sell-off, bringing the year-to-date decline to 18.5% and triggered market measures by the Financial Service Authority and the Indonesia Stock Exchange.
The exchange, starting Tuesday, will stop stock price declines at 10%, compared with a previous range of 20%-35%, while the Financial Services Authority will allow companies to buy back shares without shareholder approval.
Twelve listed state companies are planning to buy back up to US$560 mil (RM2.365 bil) of shares following the measure, a State-Owned Enterprises Ministry official said.
The main stock index on Tuesday clawed back some of its losses as Asian markets stabilised, gaining 2.3% by the midday break, while the rupiah rose 0.5%.
A deputy governor of Bank Indonesia said the central bank is intensifying its intervention in bonds, domestic non-deliverable and spot currency exchange markets to support the market.
Meanwhile, Indrawati said the government will continue to monitor whether there is a need for more support should the spread of coronavirus be prolonged.
Indonesia late last month unveiled a near US$750 mil stimulus package to battle the impact of the virus outbreak to the economy.
“We don’t want to exhaust our ammunition too early. We need to maintain our abilities to intervene should this condition is prolonged,” she said. – March 10, 2020, Reuters
