Currency crisis in two Sanskriti superstates

Matein Khalid

It is an ironic twist of history that the world’s largest Muslim country, an archipelago of 18,000 islands, whose ancient Sumatran kings once funded countless monasteries/temples at Nalanda, the Harvard/Oxford of Vedic India two millennia ago. Sumatra was then known as the kingdom of Srivijaya when Mauryan India’s ruler was Ashoka, imperator of the Magadan superstate. Fast forward 22 centuries and the two best performing emerging Asian stock markets for dollar investors and moi have been India and Indonesia. Yet King Dollar, a trade war and capricious global capital flows threaten currency chaos in both these two Sanskriti civilizational states. After all, I was a student of history long before I discovered I could finance my global wanderlust via EM FX macro trading.

Indonesia, with its $1.5 trillion economy, 5% GDP growth, limitless lithium/nickel treasure trove in an electrifying world economy, 280 million people/200 million smartphones, Indonesia was a must own for me in the Jokowi era but I will take a pass in 2025 as General Subianto, briefly Suharto’s son in law, faces the worst currency crisis since Sasurji’s regime was blown apart by a rupiah freefall/banking crisis in 1998. The Rupiah (IDR) is now down 17% and has unnerved global hedge funds after the central bank failed to prevent its fall below 16,000. Will I finally get the chance to buy Bank Mandiri at 20% discount in 2025? Once the Bank of Japan guts the carry trade, yes.

The IMF/World Bank have a bromance with Jakarta and I was honoured to know Sri Mulyani Indrawati, Jokowi’s Finance Minister and the architect of his economic miracle. Yet the rupiah crisis/Trump 2.0 means Subianto will not achieve his 8% GDP growth target. Chicken salad and chicken merde are both white but EM FX trading teaches you fast to tell the difference, lest you drown in Merde-istan.

Subianto is a former general but unlike our Pakistani Generals who just engineered a 100% US dollar return in Karachi after locking up PTI’s voodoonomics maestro Imran Khan, is clueless about the leveraged wolves of Wall Street. Subianto wants to boost government spending and ignore the deficit, so the rupiah can well fall to 18,000 before the bond vigilantes teach him a lesson. Like 1965 and 1998, 2025 will be the year of living dangerously in Jakarta.

I had warned my NRI friends that the Indian rupee was a screaming short when the RBI let it fall below 84, despite $700 billion in high octane FX reserves. INR has now fallen to 85.5. It is no coincidence that this fall in the INR has coincided with a spike in its volatility, a 8% overvaluation on its REER and a new RBI boss Sanjay Malhotra. If it quacks like a duck and walks like a duck, it is a duck or, in this case, a central bank policy shift. Too bad Malhotra is an IAS hack with no real world experience with Planet Forex. The INR is headed to 92 as the bears go berserk on Dalal Street. Bahloo alert!