The pain sweeping emerging markets hit Indonesia, where shares suffered their worst day in nearly two years on Wednesday, and the government unveiled a raft of measures to shore up a currency that has hit two-decade lows.
Blowups in Turkey and Argentina, and a surge in the dollar, have dented investors’ appetite for emerging markets. Among Asian countries, Indonesia is particularly vulnerable because it has borrowed heavily in dollars and because foreigners own large chunks of its domestic stock and bond markets.
The benchmark Jakarta Composite index fell 3.8% to 5683.5, its biggest one-day drop since November 2016. It had tumbled as much as 4.8% during the trading session. Most Asian markets also declined, along with developing countries elsewhere such as South Africa.
The rupiah was at 14,930 per U.S. dollar, according to Thomson Reuters—levels last seen during the Asian financial crisis two decades ago. The 10-year government-bond yield rose to 8.49%, the highest since January 2016. Yields rise as bond prices fall.
Rob Carnell, head of research for Asia at ING, said Indonesia is the most obvious target for investors to desert in Asia during a broader emerging-market selloff, pointing to the country’s dollar debts and its current-account deficit.
Indonesia is “the nearest we’ve got to an Argentina or South Africa or Turkey in the region, although I’d stress they’re considerably stronger than any of those countries,” he said.
During the day, Bank Indonesia said it had sold dollars and bought government bonds. The central bank has repeatedly intervened in currency and bond markets and raised interest rates by more than 1 percentage point since May to defend the currency. For the year, the rupiah has nonetheless slumped more than 9% against the dollar.
The government said Wednesday that the construction of several power plants that haven’t secured financing commitments would be delayed by up to four years to help strengthen the rupiah. The energy and resources ministry said savings on the imports of capital goods could save $8 billion to $10 billion.
Separately, the government increased the import tax by up to four times on more than 1,100 consumer goods to try to arrest the rupiah’s fall.
Finance Minister Sri Mulyani Indrawati said the increase would help reduce imports.
She said the goods that now carry a higher import tax of between 7.5% and 10%, compared with between 2.5% and 7.5% previously, include electronic appliances and luxury vehicles.
“We are facing an unusual situation that needs an unusual response,” the former World Bank managing director said.
Stock markets across the region traded lower, with Hong Kong falling 2.6% and markets in Shanghai, Singapore, and Manila all dropping more than 1.5%. Even India’s Sensex, which has hit a string of recent highs recently, shed 0.8%.
South Africa, another vulnerable emerging market, also suffered. The rand weakened to 15.5941 per dollar, its lowest since 2016, and the FTSE JSE All-Share index fell 0.7%.
A dollar rally and signs the Federal Reserve would continue lifting borrowing costs have sucked cash back to the U.S. from emerging markets. That has reversed a trend where extremely low interest rates had sent investors into riskier markets in search of juicy returns.
—Joko Hariyanto and I Made Sentana contributed to this article.
Write to Saumya Vaishampayan at [email protected]