Indonesia stocks down on election result

Indonesian stocks have slipped more than three per cent after the main opposition party failed to perform as well as expected in legislative elections, sparking fears of future policy deadlock in Southeast Asia's biggest economy.

The Jakarta market sank 3.11 per cent on Thursday morning after the Indonesian Democratic Party of Struggle (PDI-P) came first with around 20 per cent of the vote in Wednesday's polls, according to unofficial tallies.

But while the PDI-P won - and its popular presidential candidate, Jakarta governor Joko Widodo, is on course to be the country's next leader - the results suggest it will have to form a coalition government.

A party or coalition of parties needs at least 25 per cent of the national vote, or 20 per cent of 560 seats in the lower house of parliament, to field a presidential candidate in the July election.

The result increased "the chance that any coalition which comes into power may consist of an unwieldy group of parties, rather than just two or three with reasonably similar political platforms", said Wellian Wiranto, an economist from OCBC bank, in a note.

Analysts have warned such an outcome could stall much-needed economic reforms in the country. He warned that parliament could split into small factions, as has been the case under the current six-party coalition headed by President Susilo Bambang Yudhoyono's Democratic Party.

"Many decisions will be hard to make," Umar Bakry, executive director of pollster Lembaga Survei Nasional, told Dow Jones Newswires.

Economic growth in Indonesia dropped to a four-year low in 2013, and while external factors played a role, the government has also been criticised for failing to push through reforms, often due to conflicts between coalition partners.

An attempt by ministers to water down a controversial ban on unprocessed mineral ore exports was blocked by parliament, while the government faced strong opposition when it implemented a huge reduction in fuel subsidies.

As the unofficial tallies trickled in late Wednesday, Widodo, known by his nickname of "Jokowi" - who is seen as a fresh face in a country still dominated by an elite from autocratic Suharto era - signalled he was open to forming a coalition.

Support for Yudhoyono's party halved following recent corruption scandals, while Islamic parties in the world's most populous Muslim-majority country saw a jump in their popularity despite predictions they would slump.