Indonesia's benchmark Jakarta Composite Index finished at an all-time record level on Friday (17/03), supported by mostly rising Asian stocks as global investors are attracted again by higher-yielding assets in emerging markets after the US Federal Reserve turned out to be not as "hawkish" as market participants had assumed. Indeed the Fed raised its key Fed Funds Rate by 25 basis points at the March policy meeting but the US central bank emphasized that further interest rate hikes would be gradual.
While the stock rally in the USA lost its momentum, most Asian stock markets experienced their best week in many months (Japan and China being exceptions). Investors are attracted by these assets as any further monetary tightening in the USA will be gradual and therefore investors prefer to seek some short-term profit from higher-yielding emerging market assets. The weakening US dollar, depreciating significantly after the latest Fed meeting, also made these assets more attractive.
However, this should be a short-term phenomenon only as market participants will soon focus on the coming Fed Funds rate hikes as well as the economic policies of US President Donald Trump (that are expected to support the US dollar).
On Thursday (16/03) the central bank of Indonesia (Bank Indonesia) left its key interest rate unchanged, while releasing a positive report on the Indonesian economy despite global challenges. It sees the Indonesian economy growing in the range of 5.0 - 5.4 percent (y/y) in 2017 on the back of stronger investment, robust household and government consumption as well as improving export performance (amid rising commodity prices).
Other matters that support risk appetite are good full-year 2016 corporate earnings of Indonesia's listed companies and the Dutch election result. In this election Geert Wilders' anti-Euro party won less seats than expected, hence easing concerns ahead of French elections as well as concerns about the stability of the European Union.
On Friday (17/03) Indonesia's Jakarta Composite Index (IHSG) rose 0.40 percent to 5,540.43 points, an all-time record high position.
Meanwhile, the US dollar, which weakened significantly after the latest Fed meeting, stabilized on Friday. The Indonesian rupiah appreciated only 0.01 percent to IDR 13,345 per US dollar (Bloomberg Dollar Index). However, Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) depreciated 0.04 percent to IDR 13,342 per US dollar.
Indonesian Rupiah versus US Dollar (JISDOR):| Source: Bank Indonesia