Lessons from Indonesian polls

Indonesia is big, stretching all the way from the Andaman Sea to Papua New Guinea, roughly above the Australian province of Queensland. Sitting in the tiny island of Singapore, it appears even bigger. It is important to Singapore as the main driver of the region's economy. No wonder the polls there have evoked a lot of interest and excitement here. So has Jakarta governor Joko Nidodo aka Jokowi.

Experts had analysed and concluded that Jokowi was good for the region. Noted academician Kishore Mahbubani, whom Singaporeans are ready to pay to listen to, had recently emphasised how he was fortunate to have spent time with Jokowi and how he found him to be clean, down-to-earth and business-friendly. Mahbubani found Jokowi's background as a furniture manufacturer gave him a better understanding of business and he realised the importance of logistics and is likely to work on improving ports and airports, if elected. Logistics costs in the archipelago as a percentage of gross domestic product (GDP) is among highest at over 25 per cent. Developing ports would kickstart a virtuous cycle that would push Indonesian economy to grow faster, thereby taking the entire Asean region along.

About 80 per cent of fund managers said in a poll that if Jokowi got elected, they would buy more stocks. Indonesian benchmark Jakarta Composite index (JCI) gained 11 per cent riding on opinion polls giving high ratings for Jokowi and a 27 per cent vote share for his party, PDI (P).

Unfortunately Indonesian voters had other ideas. In last week's legislative polls, they gave PDI(P) only 19 per cent votes. On Thursday alone, when quick count results were out, JCI corrected 3.2 per cent. Though it recovered a part of its losses next day, it was clear that bulls are running for cover already.

What does that story teach people going gaga over the impending political change in Indonesia's western neighbour, India? (Banda Aceh in Indonesia is about 200 km from Indira Point in Great Nicobar, India's southern tip, and the two countries share a maritime border.)

What happens to the 4,400 points or 24 per cent gains in the BSE Sensex since the lows of August and the recent 12 per cent rally since the lows of March, if India doesn't vote for its own 'business-friendly' candidate?

The Street probably doesn't even want to think of such unhappy endings.

But, let us search for answers in history. Between the post-Lehman lows in October 2008 and April 10, 2009 (same point five years ago), the BSE Sensex rallied 2,294 points or 27 per cent to 10,803. In between, there was a sharp correction around March, when th index hit a low of 8,100 and a sharper rally of 30 per cent in the one-month period.

By May 15, 2009, it gained another 12.7 per cent to 12,173. Like now, the Street was betting on a new, business-friendly government. Eventually, it did not get the rightwing government it wanted. But, the Street took the absence of the leftwing as an excuse to take a leap and start flirting with 15,000 in a matter of minutes. The Street seems to have committed itself into this rally. No matter what the outcome is, it is going to find its reasons to push ahead. My only doubt is, who is India's Jokowi? Is he the 'simple, clean' guy? Or is he the 'business-friendly' guy?