* Indonesia stocks hit lowest point since July 2025

* Rupiah weakens to lifetime low of 16,995 a dollar

* S.Korea stocks end 1% higher, Taiwan stocks end lower

* Philippine peso briefly breaches 60-per-dollar level

(Updates for afternoon trade)

By Sameer Manekar

March 16 (Reuters) - Indonesian stocks slid to an

eight-month low on Monday, while the rupiah neared the

17,000-per-dollar mark, as investors feared that the net oil

importer could breach its budget deficit limit due to the Middle

East war.

President Prabowo Subianto, in an interview with Bloomberg

News on Sunday, said he would approve a short-term increase in

the budget deficit beyond the 3% legal ceiling if oil prices

stayed elevated for a sustained period.

Investors worry that such a move could open the door to

broader, less predictable spending, threatening Indonesia's

hard-won fiscal discipline.

"The bigger danger is not only a wider deficit, but the

signal that the fiscal rule is becoming negotiable," Josua

Pardede, chief economist at Permata Bank, said.

"Once that signal is sent, it can weaken the rupiah, raise

borrowing costs, and make every future policy promise harder to

finance."

Pardede does not expect the president to "rush immediately

to formally lift the ceiling for the short term," but said that

the "probability of a breach has risen materially if oil remains

elevated for months and the rupiah stays under pressure."

Jakarta stocks fell 1.5%, heading for their lowest

closing level since July 2025, while the rupiah slipped

to a record low of 16,995 per dollar, just shy of the key 17,000

psychological level.

Since the start of the war, the yield on Indonesia's 10-year

government bonds has jumped more than 40 basis points to 6.819%,

the highest since late June last year.

Foreign investors have pulled 13.18 trillion rupiah ($775.75

million) from government bonds this month, according to data

compiled by Maybank global market economist Myrdal Gunarto.

Elsewhere in emerging Asia, stocks fluctuated as investors

remained on edge over the escalating tensions in the Middle

East, despite hopes that a coalition to escort ships through the

Strait of Hormuz would ease supply pressure.

A surge in oil prices since the start of the war has rippled

through financial markets, triggering heavy equity outflows and

complicating the inflation outlook for most central banks,

likely halting their easing cycles.

Bank Indonesia is expected to keep its interest rate steady

in a meeting on Tuesday, a Reuters poll showed.

Among regional equities, stocks in Seoul closed up

1.1% after falling as much as 0.7% earlier. Taiwan's benchmark

gauge slipped marginally after trading in a tight range.

Taiwan's dollar hovered near 32 a dollar, its

weakest level since early May last year.

Shares in Singapore and Malaysia edged

higher, while those in Thailand were flat.

Equities in the Philippines slipped about 1%, while

the peso briefly touched 60 per dollar before recovering

to around 59.857.

HIGHLIGHTS:

** Yield on Indonesia's 10-year benchmark index

flat at 6.819%

** Vietnam braces for flight cuts from April after China,

Thailand ban jet fuel exports

** China's economy builds early momentum in 2026 as risks

mount

Asia stock indexes and currencies at 0730 GMT

COUNTRY FX FX FX INDEX STOCKS STOCKS

RIC DAILY % YTD % DAILY % YTD %

Japan +0.24 -1.68 -0.13 3.70

China +0.06 +1.27 -0.26 2.92

India +0.09 -2.71 -0.02 -11.42

Indonesia -0.29 -1.85 -1.50 -18.70

Malaysia +0.13 +3.18 0.02 1.13

Philippines -0.22 -1.74 -0.86 -0.77

S.Korea +0.07 -3.81 1.14 31.69

Singapore +0.12 +0.30 0.43 4.66

Taiwan -0.10 -1.60 -0.17 15.12

Thailand -0.22 -3.23 -0.21 11.65

($1 = 16,990.0000 rupiah)