There are still persistent external and internal factors that make it difficult for Indonesian stocks to rise. By 12:07 am local Jakarta time, Indonesia’s benchmark stock index (Jakarta Composite Index) was down 0.25 percent to 4,788.37 points. Meanwhile, the rupiah had appreciated 0.36 percent to IDR 13,462 per US dollar by the same time according to the Bloomberg Dollar Index. What are the external (foreign) and internal (domestic) factors that influence the performance of Indonesian assets on today’s trading day (04/08)?

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Manufacturing activity in Indonesia contracted for the 10th consecutive month in July 2015 as new orders declined. The Nikkei/Markit purchasing manager’s index (PMI), released on Monday (03/08), fell 0.5 points to 47.3 last month (from 47.8 in June), remaining below the level of 50 points that separates contraction from expansion. Due to deteriorating conditions in the country’s manufacturing sector, Indonesian factories shed jobs at the fastest pace since the survey started in 2011.

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Inflation in Indonesia accelerated more than expected in July 2015. Based on the latest data from Statistics Indonesia (BPS), Indonesian inflation rose 0.93 percent (m/m) in July, primarily due to higher food and transportation costs caused by the Ramadan month and Idul Fitri celebrations. During this month, the people traditionally increase consumer spending (triggering higher food prices) and millions of people travel back to their places of origin for the Idul Fitri festivities (triggering higher transportation costs).

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Indonesian state news agency Antara reported that the El Nino weather phenomenon has begun to affect several parts of the country. El Nino, which occurs once every five years on average, causes climatic changes across the Pacific Ocean leading to droughts in Southeast Asia and therefore has a major impact on harvests of agricultural commodities. Moreover, due to the shortage of rain, it is easier for fires to damage the environment. Antara reported that in Banten (West Java) as well as in Riau and Jambi (Sumatra) these effects are felt.

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