On the first trading day of the new week, both Indonesian stocks and the rupiah moved more-or-less sideways. Generally, indices in Southeast Asia were mixed as positive external sentiments were offset by local negative sentiments. In the case of Indonesia, negative local sentiments stemmed from the higher-than-estimated inflation figure in May and continued contraction of the manufacturing industry. Positive market sentiments stemmed from the USA where GDP growth was revised to minus 0.7 percent in Q1-2015.
Indonesia’s benchmark Jakarta Composite Index (IHSG) fell 0.05 percent to 5,213.82 points. Meanwhile, the Indonesian rupiah appreciated 0.08 percent per US dollar according to the Bloomberg Dollar Index.
Jakarta Composite Index (IHSG):
Last Friday after markets had closed in Asia, US authorities announced that US economic growth was revised from +0.2 percent in Q1-2015 to -0.7 percent. Emerging market stocks and currencies reacted positively to this news today as it may convince the Federal Reserve to postpone hiking US interest rates. Such a hike is expected to trigger capital outflows from emerging markets, including Indonesia.
However, domestic news caused concern among market participants. Firstly, Indonesia’s May inflation rose 0.50 percent month-to-month, or, 7.15 percent year-on-year. This figure was beyond analysts’ forecasts around 7 percent (y/y) and as such cause concern whether Indonesian inflation is under control, particularly considering that the seasonal inflation peak is about to commence. In the period June-August Indonesia is traditionally plagued by inflationary pressure due to the Ramadan and Idul Fitri celebrations as well as the start of the new school year. This also implies that an interest rate cut is highly unlikely. Currently, Indonesia’s central bank upholds a tight monetary stance (BI rate at 7.50 percent).
Secondly, Indonesia's manufacturing activity contracted for the eight consecutive month in May 2015. The HSBC Markit purchasing manager’s index climbed to 47.1 in May from 46.7 in the previous month (a score below 50 indicates contraction in manufacturing activity). Output, new orders and employment remained weak in May and fuels expectation that a sudden improvement in Indonesian manufacturing in the near term is highly unlikely.
Foreign investors recorded net selling of IDR 24.7 billion (USD $1.9 million) on Monday (01/06). Investors are now focusing on the Greek debt crisis. The euro weakened today (01/06) after the country missed a self-imposed deadline for reaching an agreement with its creditors to unlock more bailout funds (needed for a debt repayment to the IMF on 5 June 2015). This has heightened fears of a debt default and potential Greek exit (Grexit) from the Eurozone.
On Tuesday 2 June 2015, markets are closed in Indonesia due to Waisak (Buddha's Birthday).
Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) depreciated 0.14 percent to IDR 13,230 per US dollar on Monday (01/06).