JAKARTA, Oct 27 — Indonesia’s rupiah fell, reversing an earlier gain, and stocks dropped the most in two weeks as investors reacted to President Joko Widodo’s cabinet selections.

Widodo, known as Jokowi, named his lineup yesterday, choosing former deputy finance minister Bambang Brodjonegoro as the head of finance. Puan Maharani, daughter of Megawati Soekarnoputri who is chairman of Jokowi’s party, was appointed Coordinating Minister for Human Development Affairs and Culture, while Rini Soemarno, head of Jokowi’s transition team and a past trade minister, got the state-owned enterprises post.

“The market sold on the news, as they’re still digesting what the cabinet means for future policies,” Agus Yanuar, chief investment officer at PT Samuel Aset Manajemen, which oversees 4.3 trillion rupiah (RM1.16 billion) of assets, said in Jakarta. “Market expectations were too high, so the realisation that Jokowi needed to accept some compromises in forming his cabinet was negative.”

The rupiah weakened 0.4 per cent to close at 12,109 per dollar, after gaining as much as 0.4 per cent earlier, prices from local banks show. In the offshore market, one-month non- deliverable forwards declined 0.7 per cent to 12,172, 0.5 per cent weaker than the onshore spot rate, according to data compiled by Bloomberg.

The Jakarta Composite Index of shares dropped 1 per cent, the most since Oct 13, to close at 5,024.292. PT Telekomunikasi Indonesia slid 2.3 per cent, the biggest drag to the gauge, after net income missed estimates and its chief executive officer, Arief Yahya, was named tourism minister.

Fuel subsidies

Jokowi plans to cut energy subsidies to raise funds for building sea ports and health and education programs.

“Questions remain as to the scope of what he can do on the subsidy front,” said Sacha Tihanyi, currency strategist at Scotiabank in Hong Kong, referring to Jokowi. “My base-case assumption is that we get something constructive, but not game- changing.”

Jokowi met a pledge to appoint more professionals than politicians to his cabinet, naming Ignasius Jonan, president director of rail firm PT Kereta Api Indonesia, as transport minister and Sudirman Said, chief executive officer of military equipment maker PT Pindad, as energy and mineral resources minister. Sofyan Djalil, former state-owned enterprises minister, was named Coordinating Minister for Economic Affairs.

“The cabinet shows some continuity” and Jokowi “fulfilled his promise for more technocrats, which is positive,” said Saktiandi Supaat, Singapore-based head of foreign-exchange research at Malayan Banking Bhd. “The main thing now will be the policy announcements, especially on the fuel subsidies.”

Bank Indonesia set a fixing used to settle the forward contracts at 12,042 per dollar today, from 12,065 on October 24. One-month implied volatility, a measure of expected exchange-rate swings used to price options, declined 23 basis points, or 0.23 percentage point, to 9.29 per cent, data compiled by Bloomberg show.

The yield on the government’s 7.375 per cent bonds due September 2016 fell four basis points to 7.49 percent, the lowest level since September 12, according to prices from the Inter Dealer Market Association. — Bloomberg