After two days of growth, Indonesia's main stock index (IHSG) became victim of profit taking on Thursday (15/08). Particularly domestic investors were eager to sell their Indonesian assets. Falling indices on Wall Street on Wednesday (14/08) in combination with global uncertainty about the end of the Federal Reserve's quantitative easing program made a negative impact on Asian stock indices, including the IHSG. Indonesia's central bank's decision to keep its benchmark interest rate at 6.50% was well-received by most investors.
But despite the positive impact of Bank Indonesia's decision, Indonesia's index fell 0.31 percent to 4,685.13 points as weak openings in Europe on Thursday influenced the IHSG. Foreign investors bought more Indonesian stocks than they sold, while domestic investors recorded a net sell.
There is still no end in sight for the downward spiral of the Indonesian rupiah. As the benchmark interest rate was left unchanged, market participants assess it is less attractive to hold rupiahs than other currencies. The fall of Indonesia's foreign exchange reserves to USD $92.7 billion and the high yield government bonds also weakened the rupiah. Meanwhile, the US dollar has weakened against the Euro as market players anticipated on the US inflation rate.| Source: Bank Indonesia
Asian stock indices were mostly down as they followed the direction of Wall Street on the previous trading day and were influenced by weak company reports. The Nikkei fell because there was a surge in foreign bond investment in Japan which was accompanied by a strengthening Yen. Turmoil in Egypt caused the oil price to rise and may result in higher bond yields in a number of emerging economies.