As we have explained before, a significant amount of market participants will engage in profit taking after a day (or in this case a number of days) of gain. Mixed sentiments originating from the Asian continent, particularly Japan and China, as well as the depreciating Indonesian rupiah exchange rate contributed to the slight gain of Indonesia's benchmark index (known as the Jakarta Composite Index or IHSG). The IHSG rose 0.02 percent to 4,556.19 points on Tuesday (18/02).
The Bank of Japan (BoJ) announced that it will continue to expand its monetary base at the current annual rate, as well as focusing on expanding credit demand in the banking sector. This was a positive sentiment for Asian stock markets, particularly with the depreciating yen after the meeting. However, negative market sentiments originated from China where the People's Bank of China announced it would issue 14-day forward repurchase agreements for the first time in eight months. This will draw 48 billion yuan from the country's money market. Even though foreign direct investments (FDI) was reported to have increased, China's stocks mostly fell.
The Indonesian rupiah exchange rate depreciated for the first time since four days due to profit taking and market participants that made use of the current low US dollar rate. The rupiah was also negatively influenced by concerns about an increasingly tighter unprocessed mineral export ban that is expected to disturb Indonesia's trade balance by curbing exports. Lastly, speculation emerged that natural disasters, such as the Mount Kelud eruption, can lead to higher inflation and thus weakened the value of the rupiah.