US Nonfarm Payrolls, China's Bird Flu and Korean Tension Weaken the IHSG
Last week Friday, American stock markets were not able to maintain a positive trend due to Nonfarm Payrolls that increased below expectation. Moreover, concerns about a spreading bird flu epidemic in China in combination with increased political tensions in Korea impacted on Monday's trading day (8 April 2013) of the Indonesia Stock Exchange (IHSG). The index had to absorb a sell-off, thus closing lower to 4,897.52, an 0.58 percent decline.
Particularly stocks of the largest Indonesian companies (ranked by market capitalization) were sold by foreign investors. As the ten largest Indonesian companies account for almost half of the total value of Indonesia's main index, it pulled the IHSG downwards. However, when European markets opened mostly positive on Monday, they managed to give some support to the IHSG, but not enough to make it to the green area.
Foreign investors mostly sold their Indonesian assets on Monday, while domestic investors recorded a net purchase. Trade volume fell, while total value of transactions rose.
The IDR rupiah continued its downward spiral after market participants were hesitant to trade and instead prefer to wait for the speech of the Federal Reserve (after the publication of Nonfarm Payrolls), in which the Fed's view on the US economy will be given. Investors are also in anticipation of the next meeting of the The Federal Open Market Committee (FOMC) on 11 April 2013. Despite receiving positive stimulus from Japan's increased current account, the rupiah was pushed down by Indonesia's declining foreign exchange reserves and by the declining Eurozone's Sentix Investor Confidence that subsequently weakened the US dollar.
| Source: Bank IndonesiaAsian stock markets were mostly down on Monday, except for the Nikkei that still gained due to the long-term bond buying program of its central bank. This program weakens the Japanese yen and causes investors to buy stocks of companies that are engaged in Japan's export industries. China's stock markets fell due to concerns about a spreading bird flue epidemic in China (multiple victims have been reported already). Hong Kong's HSI also fell due to bird flue concerns in combination with China's plan to increase downward payments in its property sector.
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