In order to provide some support for the weakening IHSG, minister of State-Owned Enterprises Dahlan Iskan asked various state-owned companies to buy back shares from the market. There are 21 state-controlled companies listed on the Indonesia Stock Exchange (IDX). Similarly, Indonesia's two largest state pension funds, Jamsostek and Taspen, announced they increased purchases of Indonesian shares. Possibly the support of these state-linked institutions helped to soften the decline of the IHSG on Tuesday (20/08). Around midday, the index was down almost six percent, but at the end of the trading day losses were reduced to 3.21 percent. 

The Indonesian rupiah fell to its weakest level since April 2009. As the United States (and Europe) are showing signs of continued economic recovery, the Federal Reserve is expected to limit its quantitative easing program, which will see US dollars flowing back to the USA as interest rates rise. Moreover, the country's current account deficit places serious pressure on the currency.

| Source: Bank Indonesia

As today's losses on the IDX share the same underlying reasons as yesterday, we refer you to this previous column for a more thorough analysis of why the Indonesia Stock Index is on a losing streak.