EMERGING MARKETS-Jakarta stocks set for worst week since June on new rule; Asia FX down for week

By Shruti Agarwal

Oct 2 (Reuters) - Indonesian stocks were headed for their worst week in more than three months on Friday, hurt by a new minimum share price rule, while elevated bond yields, higher oil prices and a stronger US dollar put regional currencies on track for weekly losses.

Stocks in Jakarta .JKSE have declined about 3.8% so far this week, on track for their biggest weekly fall since late June, after a new exchange rule lowering the minimum share price to 1 rupiah from 50 rupiah took effect on Monday.

Intended to improve liquidity and price discovery, the rule has allowed stocks previously pinned at the old price floor to trade lower, with several recording multiple declines close to the exchange's daily limit of 15%. GoTo Gojek Tokopedia GOTO.JK has plunged 42% this week.

Indonesia's benchmark index has been ASEAN's worst performer this year, down more than 30%, after an MSCI downgrade warning in January over opaque ownership structures, limited free-float visibility and concerns about trading data triggered a broad selloff. On Friday, the index was down 0.3%.

Regional currencies ticked higher on Friday, but were set for weekly losses as elevated Treasury yields supported the dollar, which hovered near a 17-month high, while oil prices held above $100 a barrel.

Lukman Leong, chief analyst at Doo Financial Futures, viewed the day's gains as a "short-term relief" rather than a broader shift in sentiment, attributing it to easing expectations of an October Federal Reserve rate hike and the resulting decline in front-end US yields.

The Thai baht has been particularly vulnerable recently as elevated oil prices threaten higher import bills. It was the worst regional performer this week, weakening 0.7% and on track for its fourth straight weekly loss.

Adding to the cautious mood, turmoil in global bond markets persisted. The benchmark US 10-year Treasury yield hit its highest since 2002 overnight, after posting its biggest quarterly rise in 32 years.

Even so, emerging Asian government bonds outperformed their developed-market peers in September, with yields across most of the region rising far less than in the United States and Europe.

The US 10-year Treasury yield climbed about 53.5 basis points last month, while 10-year benchmark yields in Germany and France rose 25.49 bps and 68.75 bps, respectively.

By comparison, yields in South Korea, Taiwan, Singapore, Indonesia and Malaysia rose only between 7 and 16 basis points.

"Many Asian economies entered this period with relatively stable inflation and stronger external positions," Leong said.

He said Asian central banks moved relatively early during the global inflation shock, which helped anchor inflation expectations.

That, along with larger foreign exchange buffers and more resilient external balances, helped local bond markets better absorb higher global yields.

On Friday, Asian stock markets traded mixed, with Thailand .SETI and Malaysia .KLSE rising about 0.3% each, while Singapore .STI fell 0.7%.

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** Tokyo core inflation rate jumps in September, bolsters case for more BOJ hikes