MANILA/JAKARTA -- Investors in Asia have shrugged off terror attacks in Indonesia and the Philippines this week, but authorities are struggling to prevent further attacks and protect soft targets.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 1% on Thursday, and the Philippine Stock Exchange index closed 0.43% higher -- extending its gains for the fifth consecutive day. Indonesia was closed for a public holiday.
In the currency markets, the Philippine peso and the Indonesian rupiah both strengthened against the U.S. dollar. In a television interview on Thursday, a Bank Indonesia spokesperson suggested central bank intervention after Wednesday night's attack. "There was a bit shock in the domestic financial market, but we immediately took care of it," he said.
Indonesian police on Thursday raided a house of one of two suspected suicide bombers involved in killing three police officers on Wednesday night at a bus terminal in East Jakarta. Both bombers died, and at least 11 others were injured.
A link to Islamic State is still being investigated, but police say it is "very likely." They note that the latest attack bore similarities to more minor attacks on police over the past 18 months.
The explosions came just a few days before the start of Ramadan, the Islamic holy month of fasting, when consumer spending tends to increase. Economists were already monitoring the month for signs that a cooling in consumer spending has bottomed out.
Rosan Roeslani, chairman of the Indonesian Chamber of Commerce, told a local media outlet that he expected the impact on the economy to be "very, very" small.
"Investors have confidence in our stable and sustainable economic growth," he said.
Shopkeepers in Thamrin City, a mall in central Jakarta, said on Thursday that business was normal with no effects from the attacks.
"It was deserted a day after last year's attacks," said Risa, who works at a small shop selling traditional clothes. She was referring to a January 2016 attack by militants near a shopping center in central Jakarta that killed eight people, including four terrorists.
There was, however, concern because Wednesday's attack took place at a busy bus stop that commuters use daily. "I'm afraid," said Fajar, a 26-year-old Jakarta male resident. "I will still go out and shop, but will be more suspicious towards people I don't know."
In the Philippines, businesses with operations in Mindanao have heightened security following the declaration of martial law there on Tuesday night by President Rodrigo Duterte. His move followed a clash between government forces and Islamic State-aligned terrorists belonging to the Maute group in Marawi City. The martial law order is effective for 60 days, but could be prolonged or expanded nationwide if necessary, Duterte said on Wednesday.
The Philippines was under martial law from 1972-1981, and human rights abuses and summary executions were rampant.
SM Investments, which has banks and shopping centers on Mindanao, has "heightened security" in its establishments, Corazon Guidote, vice president for investor relations, told the Nikkei Asian Review.
Cebu Air and Philippine Airlines have offered rebooking options for their passengers after domestic and international travelers worried about the security situation cancelled flights, President Jaime Bautista told reporters on Thursday.
Bautista said PAL, which flies to the cities of Davao and Cagayan de Oro, may reschedule flights if a 10 p.m. curfew is imposed.
Finance Secretary Carlos Dominguez on Thursday said the martial law declaration in Mindanao, which contributes less than 20% to the national economy, will not hurt growth prospects. The Philippines is aiming for 6.5-7.5% growth this year.
"The military is in full control of the government installations and major infrastructure on the island," Dominguez said. "Martial law will ensure that these facilities are protected so that business transactions will be unaffected."
The Philippine Chamber of Commerce and Industry said businessmen are concerned, but said they have "faith" in Duterte's resolve to combat terrorism.
"Hopefully the issues will be resolved as quickly as possible with minimum loss of lives and properties," chamber president George Barcelon said on Wednesday.
Show of force, solidarity
Analysts have warned that the defeat of Islamic State in most of its strongholds in Syria and Iraq has prompted the extremist group's followers and sympathizers to strike elsewhere -- including the latest terror attacks in Indonesia and the Philippines. Others may follow.
Rodolfo Mendoza, a senior analyst at the Manila-based Philippine Institute for Peace, Violence and Terrorism Research, said terror attacks could intensify if terrorists flee the Middle East for survival. He said the intelligence community has picked up chatter that Islamic State is organizing a so-called East Asia Islamic State Province in the region. Maute's recent attempt to take control of the Muslim majority city of Marawi in Mindanao may indicate the Philippines is viewed as a convergence point.
"We expect there will be more attacks," Mendoza said.
Nasir Abbas, an Indonesian terrorism observer and an ex-member of Jemaah Islamiyah (a defunct regional terror network active in the 2000s) has observed similar patterns.
Indonesian police said the suicide bombing in Jakarta may have been inspired by the Islamic State-linked suicide bombing in the British city of Manchester on Monday and the attacks in the Philippines.
Abbas said that while different terror networks were responsible they share the same Islamic State ideology, which fuels a "sense of solidarity."
With Islamic State under pressure in Syria, related terror groups abroad have launched attacks in their respective countries to show solidarity, Abbas said. "They also want to show that they still exist -- that they're not afraid to die and are ready to sacrifice themselves."
The Jakarta-based Institute for Policy Analysis of Conflict noted in a report published earlier this month growing links between extremist groups in Southeast Asia and Bangladesh to Islamic State. It said Rohingya refugees, many of whom are stranded in Malaysia, may also be vulnerable to recruitment.
Mikhail Flores in Manila and Wataru Suzuki in Jakarta contributed to this story