Indonesia again led gains in Asia amid global relief due to the possible delay in an US interest rate hike. Indonesia's benchmark Jakarta Composite Index rose 2.35 percent to 4,445.78 points, while the Indonesian rupiah appreciated 1.81 percent to IDR 14,241 per US dollar according to the Bloomberg Dollar Index on Tuesday (06/10). After seeing the release of weak US non-farm payrolls on Friday (02/10) - triggering the assumption that US labor conditions are not strong enough to absorb an interest rate increase - global equity markets and emerging market currencies rebounded.
Goldman Sachs Group Inc stated it expects no Fed Fund Rate hike in 2015. In fact the American multinational investment banking firm said the hike may not even occur in 2016. The next two-day policy meeting of the Federal Reserve (FOMC) is scheduled for 27-28 October.
Indonesian blue chip stocks that performed well today included Astra International (+11.27 percent), Kalbe Farma (+9.38 percent), Bank Mandiri (+8.54 percent), Perusahaan Gas Negara (+5.89 percent), Bank Rakyat Indonesia (+3.56 percent), Indocement Tunggal Prakarsa (+3.21 percent), Bank Central Asia (+3.19 percent), and Bank Negara Indonesia (+3.07 percent).
Jakarta Composite Index (IHSG):
It is evident that perceptions about US monetary tightening have a major influence on the value of Indonesian assets. When markets assumed a Fed Fund Rate hike was about to happen, Indonesia was plagued by severe capital outflows. The Jakarta Composite Index became Asia's worst-performing stock index in 2015, while the rupiah turned into the second-worst performing Asian currency (after Malaysia's ringgit which is plagued by low petroleum prices). Now, with cheaper valuations, Indonesian assets become investors' darling again. However, with a big chunk of Indonesian assets in the hands of foreigners, the country is more vulnerable than other Asian emerging markets to capital outflows in times of global turmoil. Although pressures stemming from the US interest rate hike have temporarily waned, the Indonesian economy is still vulnerable to the impact of China's economic slowdown, low global commodity prices, relatively limited foreign exchange reserves, and the private sector's high US dollar-denominated foreign debt.
Other Asian markets were supported by the agreement on the Trans-Pacific Partnership that was agreed upon yesterday (after five years of negotiations) which should boost trade (as it lowers tariffs for a wide variety of products) in an area that covers 40 percent of world trade. On Tuesday, Japan's Nikkei 225 Index was up 1.00 percent (also on expectation of more stimulus measures from Japan's central bank), Singapore's Straits Times Index was up 1.61 percent, but Hong Kong's Hang Seng Index was down 0.10 percent. Markets in China were closed for a national holiday.
Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) appreciated 1.52 percent to IDR 14,382 per US dollar on Tuesday (06/10). So far this year, the rupiah has depreciated 15.6 percent against the greenback.
Indonesian Rupiah versus US Dollar (JISDOR):| Source: Bank Indonesia