Various factors contributed to the 2.30 percent decline of the Jakarta Composite Index (IHSG) on Tuesday (26/11). The index in fact fell below its support level. What were the main reasons for this weak performance? Firstly, the Indonesian rupiah exchange rate has been depreciating severely and causes concerns among market players. Secondly, most Asian stock indices fell as valuations climbed high and the Japanese Yen strengthened. Thirdly, European stock openings on Tuesday were weak. All these reasons together led to foreign net selling.
Energy stocks made Asian stock indices fall on Tuesday (26/11), while the typhoon in the Philippines and nearby surroundings contributed to negative market sentiments. The typhoon is estimated to weaken the economy thus causing this year's growth targets not to be met. Lastly, the appreciating Japanese Yen made a negative impact as it resulted in falling automotive and electronics stocks in Japan (a stronger Yen is negative for Japanese exporters).
Although the US Dollar weakened against the Yen after a number of high officials of the Bank of Japan (BoJ) expressed their concerns about the strength of Japan's economy, the Indonesia rupiah exchange rate still continued its weakening trend. Main reason for today's rupiah depreciation was the Indonesian government's US dollar-denominated bond auction on Monday (25/11). The government targeted to raise USD $450 million. However, amid an uncertain market, it only raised USD $190 million.