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Indonesian stocks dive as Jakarta plans to partially block coronavirus again

Switches wearing face masks at Tanah Abang Railway Station in Jakarta, Indonesia on 18 August 2020.

Adek Berry AFP | Getty Images

SINGAPORE – Indonesian shares fell about 5% on Thursday after the announcement that the capital Jakarta will restore partial blocking measures to slow the spread of the coronavirus.

The decline in the Jakarta Composite benchmark contrasts with the gains seen in most markets in the Asia-Pacific region. The index is also one of the weakest in the region so far this year, declining by more than 1

8% by the end of Wednesday compared to a 3.2% increase in the MSCI All Country Asia ex-Japan index.

The decline on Thursday came a day after Jakarta Gov. Anies Basvedan said he would impose large-scale mobility restrictions next Monday, as rising Covid-19 cases threaten to overwhelm the city’s health system, Reuters reported. Jakarta has been under partial blockade since April, but measures have been eased since June.

Restrictions to be reinstated will be similar to those imposed earlier, such as the temporary closure of offices, with the exception of “major” sectors, restrictions on public transport services and a ban on eating in restaurants, according to Reuters.

Jakarta, a city of more than 10 million people, is the epicenter of the outbreak of Covid-19 in Indonesia, which accounts for nearly a quarter of the country’s cumulative infections. According to government figures, the city reported more than 1,000 daily new cases for most of this month.

More than 200,000 Indonesian cumulative cases are the second highest in Southeast Asia after the Philippines, but the death toll in the country of more than 8,000 is the highest in the region, according to data collected by Johns Hopkins University.

Helmi Arman, an economist at Citi Research, said Jakarta’s plans to tighten restrictions could bring “macroeconomic and financial risks in Indonesia back into focus”.

“The economic impact of any tightening of restrictions will depend on the details of the program, as well as how strictly the new rules are applied on the ground,” he wrote in a note Wednesday.

The Indonesian economy, the largest in Southeast Asia, has been hit hard by the pandemic. Its gross domestic product fell 5.3 percent in the second quarter from a year ago, the first economic contraction since 1999.

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