Indonesian stocks continued to decline on Tuesday (15/11), for the third consecutive day. After a promising start - Indonesia's Jakarta Composite Index (IHSG) rose about 1 percent in today's first trading session - the index finished the day down 0.73 percent to 5,078.50 points. Key matters that cause this selloff are the US dollar approaching a 14-year high as well as expectation of rising inflation in the USA now Donald Trump has been elected next US president. This cocktail gives rise to capital outflows from emerging markets to the USA.
Southeast Asian indices were rising on Tuesday morning on the higher crude oil price (moving away from a two-month low) as well as some appetite for investing in shares that have become relatively cheap over the past couple of trading days. Indonesian stocks were also supported by positive trade data (another monthly trade surplus in October) that provided some ammunition for a stronger rupiah.
In the second trading session on Tuesday, however, Indonesian stocks rapidly tumbled, presumably on the same factors that have haunted markets over the past week. These are:
- Quicker and more frequent rate hikes by the US Federal Reserve
- Rising US government spending and inflation
- Rising US Treasury yields and strengthening US dollar
- Tax cuts and the implementation of pro-growth policies
- Trump's protectionist approach will protect the US economy, especially the old economy
One analyst said European investors were selling Indonesian assets and moving their funds to European equities. This would explain why Indonesia's Jakarta Composite Index went downhill after European markets opened on Tuesday.
Prior to the recent selloff, Indonesia's benchmark index was among the top performers worldwide, gaining around 17 percent year-to-date.
Meanwhile, the Indonesian rupiah appreciated 0.04 percent to IDR 13,369 per US dollar according to the Bloomberg Dollar Index.