The reality, however, is that specific national dynamics are influencing Asia in ways that are distinctive when compared to what is being seen in the western hemisphere. Recent events in China have altered the outlook in currency valuations in ways that could negatively influence key industry sectors in Indonesia. The Chinese Yuan (CNY) has seen declines of roughly 4 percent this month and the economic climate in the country looks set to continue well into next year.

Chart Outlook: USD/CNY

This has important implications for both Indonesia and for the world’s economy as a whole. For Indonesia, this means enhanced competition for western export markets. Any further revaluations from the Bank of China would make it much cheaper for foreign consumers to buy Chinese exports, and this would negatively impact Indonesian companies in a number of key industrial areas (for example, raw materials exporters).

In addition to this, significant changes in the value of the Yuan. The chart above shows a sharp spike in the USD/CNY and these moves have sparked speculation that the Federal Reserve could slow its plans to raise interest rates during the next few months. In the past, the US has gone to great lengths to limit the level of intervention China imposes with respect to its currency. So, further changes would be telling if we start to see differences in the monetary policy that is used by the Fed over the next few weeks.

Of course, no change in interest rates would lead to large alterations in the US GDP projections for 2015 -- and this would be something that adds volatility to stock markets. For all of these reasons, Indonesian investors will need to pay special attention to developments in these two key areas. Declining valuations in the CNY would make it much more difficult for Indonesian exporters to post strong revenue growth for the final quarters of this year -- and if this becomes the reality we could see further selling pressure in regional equities markets.