Asian Crisis Watch: Bears Claims Third Bourse: Indonesia's JKSE!

Bourses of three Asian nations fell into bear markets in the last two days. 

Yesterday it was the Hong Kong's Hang Seng. Earlier today, Taiwan's TWII. And the latest, the first of the ASEAN majors, Indonesia's JKSE.

These three bourses now joins China's equity markets operating under the bear's dominion. China's stocks peaked last June and crashed through July. But because the Chinese government wanted to maintain the bubble, massive interventions and controls implemented by the authorities, which I call the Xi Jinping Put, transformed China's stock market into a Frankenstein market.

(As a side note, Chinese stocks crashed again today. This week's slump essentially gave up almost all the gains from the government's massive support!)

The JKSE closed Friday with heavy losses to the tune of 2.39%.

Today's loss compounds on the earlier series of equity price hemorrhages since the JKSE peaked last April. The JKSE as of today has been down 21.5% see chart from Bloomberg.

Sad to say that Indonesian President Widodo, who graced the Indonesian bourse last May, which was then drifting at record highs, in order to convey his wish of JKSE 6,000 during his term, won't likely be met soon.

Instead, such can be seen as the culminating event of a credit driven mania.

Indonesia's stock market miseries can be traced to another closely associated symptom--the crashing currency, the rupiah. 

The Indonesian rupiah has lost some 18% since January 2014. Above is chart of the USD-IDR from investing.com

I have noted last May that a tanking currency has limits or will eventually reach a breaking point to have a significant impact on the economy:

The rupiah has been taking it to the chin and now has crashed to record levels. Question now is: To what extent will the current ‘capital buffers’ hold in the prospect of a sustained US dollar juggernaut vis-à-vis the rupiah??? Where is the breaking point for the system to snap?

If Indonesia’s system wilts and eventually cracks how will this affect the entire region? Do the big bosses of the BSP and their hordes of economists know?...

So what happens if Indonesia’s financial conditions shatters? Will capital flight be limited to Indonesia or will it spill over to the region and to the Philippines?

So far, the first manifestation of Indonesia's plummeting currency has been the stock market. The next will likely be the real economy, which will then spillover to the banking-finance sector. The said linkages should forge a feedback loop between them that raises the risks of a systemic credit event. 

Should this feedback process intensify, then this may lead to either recession that incites a crisis or vice versa (a crisis that may trigger a recession). 

Yet should more of Asian markets fall under the bear's realm, the greater the likelihood of an Asian Crisis 2.0 (2015/2016)