Despite concerns that Indonesia's benchmark stock index (IHSG) would weaken on Thursday's trading day (12/09), the index ended 0.17 percent up to 4,356.61 points. Indices on Wall Street and in Asia impacted positively on the IHSG and kept foreign investors increasing their stock portfolios in Indonesia. Moreover, the Bank Indonesia's decision to raise the country's benchmark interest rate (BI rate) by 25 basis points to 7.25 percent was generally well-received by investors. Banking stocks helped to support the IHSG.
Despite the higher BI rate, the Indonesian rupiah did not seem to be affected and continued its depreciating trend, although not as much as yesterday (11/09). It seems that the BI rate increase had a better effect on the country's stock market than on its currency, while in theory it should have been the rupiah that would have been supported. The central bank also lowered its forecast for economic growth in 2013 from 5.8-6.2 percent to 5.5-5.9 percent. This revision put pressure on the currency.| Source: Bank Indonesia
Asian stock indices were mixed. China's benchmark index rose as prime minister Li Keqiang intends to speed up financial reforms ahead of the free trade zone through higher interest rates, exchange rate reform and the internationalization of the yuan while promoting the conversion into capital accounts in order for the yuan to be used widely. Japan's Nikkei, however, fell after machinery order were lower than expected and thus made the yen appreciate. But the fall of the Nikkei was also caused by investors that want to wait for results of the Federal Reserve's meeting first (17-18 September). Positive market sentiments were caused by Australia's unemployment rate (5.8 percent) and South Korea's benchmark interest rate (kept at 2.50 percent).