Indonesia's benchmark Jakarta Composite Index fell 1.24 percent to 6,229.63 points on Tuesday (24/04). The performance of Indonesian stocks were in line with the general trend in Southeast Asia. Due to rising US treasury yields (touching nearly 3 percent, its highest level since January 2014) investors withdraw their funds from riskier assets in emerging markets. Concerns over US inflation and the fiscal deficit are behind the rising US treasury yield.
Indonesian blue chips, usually foreign investors' favorite stock picks, were under pressure. Shares of Unilever Indonesia, one of the top companies in terms of market capitalization on the Indonesia Stock Exchange, led losses by falling 5.51 percent to IDR 48,000 a piece after reporting disappointing Q1-2018 corporate earnings.
Other blue chips that were in deep red territory today include Bank Negara Indonesia (-4.01 percent), Bank Mandiri (-3.44 percent), Bank Rakyat Indonesia (-2.51 percent), and Astra International (-2.01 percent).
Meanwhile, the Indonesian rupiah appreciated 0.62 percent to IDR 13,889 per US dollar (Bloomberg Dollar Index) on Tuesday supported by market intervention conducted by Indonesia's central bank (Bank Indonesia). Bank Indonesia Governor Agus Martowardojo confirmed that the central bank has been active in markets as US dollar strength has been putting severe pressure on the rupiah, especially since Friday (20/04).
The US dollar is currently strong due to the rising US treasury yields as well as rising expectations that the Federal Reserve will raise its benchmark interest rate more than three times this year amid the strengthening US economy. Other factors that support the US dollar are a possible trade war between the USA and China as well as higher crude oil prices.
In order to defend the rupiah Bank Indonesia confirmed it has been buying sovereign bonds as well as selling a sizeable amount of foreign currency. Martowardojo added that the central bank will continue to be present in the market to prevent too volatile rupiah behavior and maintain the rupiah's stability to reflect the currency's fundamentals.
Reuters reported - citing data from Indonesia's Finance Ministry - that Bank Indonesia's holdings of sovereign bonds rose by IDR 7.12 trillion (approx. USD $513 million) over the past two trading days, while foreigners sold a net IDR 3.18 trillion in the sovereign bond market.
Another sign that shows weak risk appetite is the Finance Ministry's disappointing bond action on Tuesday (24/04), raising only IDR 6.15 trillion, less than half the indicative target of IDR 17 trillion. Rarely the indicative target is missed in these biweekly auctions of the Finance Ministry.
Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) depreciated 0.04 percent to IDR 13,900 per US dollar on Tuesday (24/04).
Indonesian Rupiah versus US Dollar (JISDOR):| Source: Bank Indonesia