Shares plunge 1.7 per cent before rebounding

The Indonesian share market dived in a knee-jerk reaction to yesterday's deadly attacks but recovered much of the lost ground by the close of trading.

Shares plunged more than 1.7 per cent on news of the terrorist assault but they recouped most of these losses to close just 0.5 per cent lower, after the central bank announced a rate cut at a planned meeting hours later.

Markets tend to rebound quickly from such attacks after an initial knee-jerk response, economists said.

"In the days after the last major attack in Jakarta on July 17, 2009, for example, the effects petered out soon after the event," said OCBC economist Wellian Wiranto.

The rupiah initially fell 1.4 per cent but stabilised soon after, and was just 1 per cent lower against the greenback as at 8pm yesterday.

Economists also downplayed the impact the blasts and gunfire would have on Indonesia's tourism sector as Jakarta is not a traditional tourist magnet, unlike Bali.

But ANZ economist Glenn Maguire expects local consumer sentiment to fall. "With an attack centred on a shopping centre, retail sales are likely to be adversely affected in the coming months, particularly department store sales," said Mr Maguire.

The first explosion reportedly took place outside a Starbucks cafe in the central business and shopping district, opposite the Sarinah shopping centre. Starbucks has since closed all its stores in Jakarta, "out of an abundance of caution, until further notice", the company said in a statement.

Less than a kilometre south of the rattled Starbucks outlet, Singapore-listed Sinarmas Land owns an office tower, Sinarmas Land Plaza, and a stake in luxury shopping mall Plaza Indonesia.

Sinarmas Land investor relations manager Ronald Ng said the firm's employees were told to knock off work an hour earlier yesterday, adding that Sinarmas is monitoring the situation.

"I don't have clarity on how this will impact the retail mall situation," he said. "The group condemns such attacks and expresses its condolences to the families and loved ones of those who passed away from the bombing."

marilee@sph.com.sg


This article was first published on January 15, 2016.
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