The latest bombings at the Ritz Carlton and JW Marriott hotels in Jakarta that killed at least nine people will have little impact on the country's economic recovery, analysts said on Friday, Channel News Asia reported.
While the blasts may hurt investor confidence in the short run, market observers noted that the longer term view is still bullish as fundamentals are in place for growth.
This includes surprise GDP growth in the first quarter of 2009, a positive outlook by ratings agencies on its sovereign rating, and an investor-friendly outcome from recent elections. The positive outlook assigned by Moody's Investors Service on Indonesia's credit ratings remains intact, said Aninda Mitra, Moody's primary analyst for Indonesia. "I find it very hard to see a wider or deeper impact on overall political stability or even on the economic outlook," said Aninda Mitra, Moody's primary analyst for Indonesia.
“I don't think that really changes anything. These kinds of incidents can and have happened anywhere so there's nothing unique about Jakarta or Indonesia,” said James McCormack, head of Asian sovereign ratings at Fitch. “It's not going to change our view on credit fundamentals or political stability or any of those issues,” he said.
“Terrorist threats in Indonesia are nothing new,” said Johanna Chua, head of Asian economic research at Citigroup Inc. in Hong Kong. “The economic impact will likely be limited.”
“While tourism and general retail and travel-related activities could be affected by the latest events, we expect the impact to be temporary,” said Chua.
Accor SA, Europe’s biggest hotelier and operator of 37 hotels in Indonesia, said it will push through with plans to develop 15 locations in the country, Bloomberg reported.
The Paris-based company, which has 11 hotels in Jakarta, “remains committed to Indonesia,” Gerard Guillouet, vice president for Accor operations in Malaysia, Indonesia and Singapore, said in an e-mailed statement. “Global factors are still in favor of Indonesia,” said Fauzi Ichsan, senior economist at Standard Chartered Plc in Jakarta. The economy is “fundamentally strong,” he said.
“Global factors are still in favor of Indonesia: pessimism over the US economy is receding, encouraging global investors to re-enter emerging markets, including Indonesia," Standard Chartered economist Eric Sugandi told Dow Jones Newswires.
The rupiah declined the most in two weeks and hotel stocks slumped after bombings. The rupiah slid 0.6% to close the day on Friday at Rp10,185 to the US dollar, compared to the close of 10,190 a week earlier. The currency reached 10,075 on Thursday.
Commenting on the potential for further weakness in the rupiah, Peter Redward, head of emerging Asia research at Barclays Plc in Singapore, said Bank Indonesia is in a strong position to support the market in the event of any slide. On the stock market, the Jakarta Composite Index lost 0.55% to 2,106.35, compared to 2,063.09 a week earlier.
"Obviously the blasts today have dragged down the index. The markets in the region have gone up," Ciptadana Securities analyst Syaiful Adrian told Agence France-Presse.
The cost of protecting Indonesia’s bonds from default rose five basis points to 2.87 percentage points, according to CMA DataVision in Singapore. The contracts rise as perceptions of credit quality deteriorate.
“There could well be a knee-jerk impact,” said Hugh Young, Asian managing director for Aberdeen Asset Management Plc. “Things like this are always a worry but one learns to live with it.”
“The weakness will be short-lived,” said Tim Condon, chief Asia economist at ING Groep NV in Singapore. “Markets will recover and if we go for another protracted period without any follow-up attacks then markets will forget about it and we will go back to the economic fundamentals.”
Source: Indonesia Trade & Inv News-21 July 2009