The continued presence of negative market sentiments made it impossible for Indonesia's Jakarta Composite Index (IHSG) to rebound. The looming end of the FED's quantitative easing program - which may be wound down sooner than expected - is a big cause for concern. The depreciating Indonesia rupiah exchange rate intensifies these concerns, particularly regarding companies that have exposure to volatile US dollar movements. Furthermore, investors are waiting for further US economic data as well as for Bank Indonesia's next meeting.
On 12 December 2013, the next Board of Governor's meeting of Bank Indonesia is scheduled and which will answer the question whether the bank will raise its benchmark interest rate (BI rate) again. Between June and November 2013, Bank Indonesia raised its BI rate from 5.75 percent to 7.50 percent in order to curtail high inflation. However, this policy comes at the expense of higher economic growth.
The IHSG fell 1.11 percent to 4,241.30 on Wednesday (04/12).
| Source: Bank Indonesia
The Indonesian rupiah exchange rate continued its depreciating trend amid speculation that the quantitative easing program will be wound down soon as US economic data are improving. Another factor is that US dollar demand hightened as local Indonesian companies are buying US dollars for end-of-the-year debt repayments.