Although we initially expected that the benchmark stock index of Indonesia (Jakarta Composite Index, abbreviated IHSG) would be supported by the various macroeconomic data (inflation, trade balance, and manufacturing activity) that were released by Statistics Indonesia today, the opposite is what happened. The index went into red territory amid profit taking, although the bond market in fact strengthened and foreign investors recorded net buying at IDR 224 billion (USD $18.7 million).
Negative market sentiments were caused by the higher-than-expected October inflation (0.47 percent month-on-month) and the depreciating rupiah exchange rate. The country also posted another trade deficit in September (USD $270 million) although this was smaller than our projection at USD $389 million.
The Jakarta Composite Index fell 0.08 percent to 5,085.51 points on Monday (03/11).
Most Asian stock indices were up on Australia’s higher AIG manufacturing index and China’s HSBC manufacturing PMI. Furthermore, markets were positive after the Bank of Japan injected USD $725 billion worth of stimulus into stocks and other assets.
The Indonesian rupiah exchange rate depreciated 0.20 percent to IDR 12,109 per US dollar according to the Bloomberg Dollar Index. After the Bank of Japan increased stimulus, investors initially reacted positively as this will offset the negative impact of the ending of the US Federal Reserve’s quantitative easing program. However, market participants are also aware that the Bank of Japan’s stimulus will cause a weakening yen and stronger US dollar.| Source: Bank Indonesia