Indonesian stocks continue to fall on today’s trading day (28/04). After having declined 3.49 percent yesterday, the benchmark Jakarta Composite Index fell a further 1.00 percent during the first trading session on Tuesday. Investors, particularly foreign ones, are still concerned about weak first quarter financial results of listed Indonesian companies, signalling that the country’s economic growth in Q1-2015 will be disappointing too. Furthermore, the market is waiting for results of the Federal Reserve’s two-day policy meeting which is set to start today.
Generally, analysts expect that the US Federal Reserve will not change its viewpoints compared to the previous meeting. After having seen the release of several weak US macroeconomic data in recent weeks, it is expected that US interest rates will be raised in the fourth quarter of 2015. This further monetary tightening in the USA (after the US quantitative easing program ended last year) will most likely result in capital outflows from emerging markets, including Indonesia.
Meanwhile, concerns heightened about the Greek debt situation as the European Union and the new leftist Greek government have not been able to reach an agreement yet, meaning that Greece cannot yet receive much-needed funds from a bail-out package (to avert bankruptcy).
Foreign investors are dumping Indonesian assets as they are disappointed with the government’s failure to boost infrastructure projects in the first quarter of 2015 as well as weak government expenditures so far this year. The imminent executions of eight foreign drug traffickers (possibly today or tomorrow) is also not supporting positive market sentiments.
Jakarta Composite Index (IHSG):
The Indonesian rupiah also weakened. Despite the US dollar having depreciated against a basket of world currencies ahead of the Federal Reserve meeting, the rupiah was down 0.12 percent to IDR 12,998 per US dollar according to the Bloomberg Dollar Index at 12:55 pm local Jakarta time on Tuesday (28/04).
Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) depreciated 0.43 percent to IDR 12,978 per US dollar on Tuesday (28/04).
Indonesian Rupiah versus US Dollar (JISDOR):| Source: Bank Indonesia