Indonesian stocks and the country's currency feel the negative impact of the further winding down of the Federal Reserve's bond-buying program (quantitative easing). Yesterday (29/01), it was announced that the Fed will cut the bond-buying program by USD $10 billion to USD $65 billion per month. Among market participants concern emerged about the stability of emerging economies amid the tapering as capital outflows are expected. After opening, the benchmark stock index of Indonesia (IHSG) immediately fell more than 1 percent.
The financial sector was the worst performer on Thursday morning (10:15 local Indonesian time). Several large Indonesian banks saw their stocks drop: Bank Mandiri (-2.87 percent), Bank Rakyat Indonesia (-2.41 percent) and Bank Central Asia (-1.50 percent).
On the first trading day after the Federal Reserve announced further tapering, the US dollar tends to appreciate against currencies in the Asia Pacific. On Thursday morning (30/01), the US dollar only weakened against Japan's yen and the Singapore dollar. Based on the Bloomberg Dollar Index, the Indonesian rupiah exchange rate depreciated 0.37 percent to IDR 12,211 per US dollar at 10:15 local Jakarta time.