Stock market and financial market players responded positively to the announcement of the second part of the cabinet reshuffle by President Joko Widodo, Wednesday (27/7). In response to the appointment of Sri Mulyani as Minister of Finance in particular, the Jakarta Composite Index (IHSG) surged and the rupiah strengthened against the US dollar.
At the close of the first trading session on the Indonesian Stock Exchange (BEI), the IHSG was at 5.278, up1.03 percent increase on the close of trade the previous day. At the start of trade yesterday, the IHSG had broken the 5,300 point.
The IHSG increase came amid volatility in stock market indices across South East Asia, Wednesday. The Hang Seng Index on the Hong Kong stock exchange was down 0.3 percent, while the Nikkei 225 Index on the Tokyo exchange was up 2.1 percent increase. The MSCI Asia Pacific Index, which reflects primary stock market indices in the region, edged up 0.3 percent.
Financial market players also responded positively to the second part of the reshuffle. On the spot market, by noon Wednesday Western Indonesia Time, the rupiah had edged up 0.5 percent on the previous day to IDR 13,115 to the US dollar. During trade yesterday, the Indonesian currency peaked at IDR 13,107 to the US dollar.
Research Lead at Universal Broker Indonesia Satrio Utomo said that market players had heard rumours and speculated from the start of trade on Sri Mulyani being appointed Minister of Finance. “That drove a significant hike in banking shares amid sluggish performance,” he told Katadata.
According to Satrio, market players placed great hope in the World Bank’s Managing Director, in executing President Widodo’s economic programs. “In other words, given President Widodo’s high targets, the market expects Sri Mulyani to be appointed Minister of Finance, bringing those targets within reach. For example,it makes the tax amnesty target more feasible.”
Research Lead at Bahana Securities Harry Su also said that market players had reacted in a positive way to Sri Mulyani’s appointment.
“Very positive, just look at how fast the index (IHSG) is rising,” he said.
Harry added that market players trust Sri because she proved herself clean and professional during her previous appointment at the same position under former president Susilo Bambang Yudhoyono. He was also optimistic that fiscal policy would improve in the hands of Sri Mulyani. “Tax reforms will be better.”
The President announced part two of the cabinet reshuffle at the Presidential Palace in Jakarta around 11 a.m. Wednesday (27/7). Changes were made to 12 positions, including Head of the Indonesia Capital Investment Coordinating Board (BKPM). Several ministers switched positions, but there also several new faces.
The new faces include Sri Mulyani (Minister of Finance), Wiranto (Coordinating Minister for Political, Legal, and Security Affairs), Eko Putro Sandjojo (Minister of Villages, Disadvantaged Regions and Transmigration), Budi Karya Sumadi (Minister of Transport), Muhadjir Effendy (Minister of Education and Culture), Enggartiasto Lukita (Minister of Trade), Airlangga Hartarto (Minister of Industry), Archandra Tahar (Minister of Energy and Mineral Resources) and Asman Abnur (Minister of State Administration and Bureaucratic Reform).
Those shifting positions were former Coordinating Minister for Political, Legal, and Security Luhut Panjaitan, who was appointed the Coordinating Minister of Maritime Affairs; former Minister of Finance Bambang Brodjonegoro, who is now the Minister of National Development Planning/Head of the National Development Planning Agency (Bappenas);former Minister of National Development Planning/Head of Bappenas SofyanDjali, who takes up the post of Minister of Agrarian Affairs; and former Minister of Trade Thomas Lembong, who is now Head of the Investment Coordinating Board (BKPM).