Those who invest in Indonesian stocks and the rupiah may prefer to remain in 'wait and see'-mode ahead of the US Federal Reserve's September two-day policy meeting (20-21 September). In the new trading week markets are again plagued by a very high degree of volatility due to changing perceptions regarding the Fed Funds Rate hike. On Monday (12/09), when Indonesian markets were closed for a public holiday, Asia experienced a major selloff, following Wall Street last Friday when US stocks plunged on fears of a looming (sooner-than-later) Fed rate hike.
Today (13/09), however, Asian stocks (Japan, Hong Kong and South Korea) and currencies rebounded sharply, following the rebound that occurred on Wall Street overnight. This worldwide rebound was the result of dovish statements made by Federal Reserve Governor Lael Brainard. After these statements futures prices immediately indicated that the probability of a September Fed Funds Rate hike dropped by eight percentage points to 22 percent.
However, given that Indonesian markets were closed on Monday for the Muslim day of sacrifice (Idul Adha), Indonesian stocks may still need to absorb the negative sentiments that were causing big losses on Monday. However, in combination with positive sentiments (namely dovish statements regarding US monetary policy) that are influencing markets on Tuesday (13/09) losses in Indonesia may be somewhat limited today.