Indonesian assets made a remarkable performance on Monday (01/08). Indonesia's benchmark Jakarta Composite Index surged 2.79 percent to 5,361.58 points, while the rupiah appreciated 0.50 percent to IDR 13,047 per US dollar. Indonesian stocks - by far - outperformed their counterparts in other Asian Pacific nations. Overall, the majority of Asian stocks rose today on the back of waning expectations of another US interest rate hike in the near future.
US economic growth in the second quarter of 2016 reached 1.2 percent (y/y), roughly half what analysts had been expecting (moreover Q1-2016 US GDP growth was revised downward to 0.8 percent y/y). These disappointing figures strengthen the belief in markets that the US Federal Reserve will not implement monetary tightening (an interest rate hike) anytime soon (at least not in the next couple of months). For emerging market assets this is great news as yields are more attractive in these markets and therefore they see capital inflows (provided there are no major shocks that curb risk appetite).
New York Federal Reserve President William Dudley stated that the US central bank should remain cautious, in other words, not raise interest rates as risks to the US economy persist. Markets are now eagerly awaiting the US jobs data that are due on Friday. Provided inflation and US employment improve then one US interest rate could still be on the agenda before the end of the year.
The Jakarta Composite Index rose 2.79 percent, its highest level since April 2015, driven by finance and telecom stocks. All Indonesia's blue chip stocks (foreign investors' darling) surged, particularly supported by the big fall that occurred on Friday when Indonesian assets were in deep red after the Bank of Japan announced a disappointing stimulus package. Friday's decline made blue chips relatively cheap.
Indonesia's macroeconomic data, released this morning, presented a mixed picture. While inflation was lower-than-expected (currently at 3.21 percent y/y), the nation's manufacturing activity experienced an unexpected (and sharp) decline in July.
Chinese assets were under pressure today after the nation's manufacturing Purchasing Managers’ Index (PMI) for July showed contraction for the first time in five months. Japanese stocks, on the other hand, rose modestly as the yen's rally paused.
Meanwhile, oil prices continued to fall on Monday (01/08) on persistent concern about the global supply glut (reports surfaced that indicate rising output in OPEC nations as well as US rig oil additions). Brent crude fell USD $0.44 to USD $43.09 per barrel, while US West Texas intermediate declined USD $0.40 to USD $41.20 per barrel on Monday morning.
Bank Indonesia's benchmark rupiah rate (the Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) appreciated 0.11 percent to IDR 13,080 per US dollar on Monday (01/08).
Indonesian Rupiah versus US Dollar (JISDOR):| Source: Bank Indonesia