Negative market sentiments, especially originating from within Indonesia, made investors shy away from Indonesia's main stock index (IHSG) on Monday (10/06). Similar to last Friday, when the index fell 2.70 percent, foreign investors continued to sell large proportions of their Indonesian stock portfolios. The index lost 1.81 percent today as investors are concerned about the current state of Indonesia's economy. Other major indices of Asia were mixed but with a strengthening tendency, despite weak data from China.
Factors that contribute to negative market sentiments in Indonesia are the weakening trend of the IDR rupiah, the fall of Indonesia's foreign exchange reserves during the last five months, and uncertainty about when fuel subsidies will be reduced.
Today (10/06), the IHSG fell 1.81 percent to 4,777.37 points. Contrary to foreign investors, domestic market participants recorded a nett buy.
The IDR rupiah continued its weakening trend as investors were concerned about a USD $7.78 billion fall in Indonesia's foreign exchange reserves. These funds were used by Indonesia´s central bank (Bank Indonesia) for monetary operations. Another reason that investors shy away from the rupiah is that there is still uncertainty about when the country´s fuel subsidies will be reduced in order to relieve the government budget. President Susilo Bambang Yudhoyono announced last month that subsidized fuel prices will be raised in June after the House of Representatives would have agreed on compensation (cash) programs for the poor. Moreover, South Korea's Won and the Australian dollar weakened due to a sharp increase in US Treasury bond yields. This also impacted negatively on Indonesia's rupiah.| Source: Bank Indonesia
Asian stock indices were mixed. Last week's positive endings of US stock indices made a positive impact, whereas economic data from China brought negative market sentiments. China's industrial production and retail sales fell. China's trade balance rose but was not well-received as both import and export figures fell. Japan's consumer confidence rose as well as the country's GDP (1.0 percent, QoQ) and was accompanied by a fall of the Yen.