5 December 2019 (closed)
USD/IDR (14,094) -31.01 -0.22%
EUR/IDR (15,622) -28.00 -0.18%
Jakarta Composite Index (6,152.12) +39.24 +0.64%
There is plenty of news that is impacting on Asia's financial markets this morning: a big earthquake (as well as tsunami alert) occurred in Japan's Fukushima, the crude oil price surged to a three-week high, US stocks touched record high levels overnight, while Indonesian authorities officially banned another "anti-Ahok protest" rally. Most Asian stocks are rising on Tuesday morning (22/11) although Indonesia's benchmark Jakarta Composite Index started in the red. However, the index quickly entered green territory some time later. Meanwhile, the rupiah remains under pressure. Lets take a closer look.
A 7.4-magnitude earthquake struck off the coast of Fukushima in the northern part of Japan on Tuesday morning (22/11). This area is the same region that was devastated by a massive earthquake, tsunami and nuclear disaster in 2011. Although there have not been any reports of casualties, a tsunami of up to 1.4 meters was detected around Sendai, about 70 km north of Fukushima. This made local residents flee to higher ground and prompted concern about the Fukushima nuclear power plants.
However, despite higher-than-usual waves along the coast, nothing went over the tidal barriers. At around 10:00 am local Jakarta time the tsunami threat in Japan has largely passed. Meanwhile, plant operator Tepco said its thermal power plants were unaffected by the quake (a pump that supplies cooling water did stop working, but a backup pump was launched to restore cooling water).
Before Japan's market opened on Tuesday (22/11), Nikkei futures traded in the USA briefly slipped after the earthquake. Earlier, Japan's benchmark index entered bull territory, particularly because the weaker yen (versus the US dollar) makes export-oriented stocks more attractive. Despite slightly slipping futures, Japan's shares are up modestly on Tuesday. However, nvestors are expected to be cautious after the long rally, especially because Japan's markets are closed on Wednesday (23/11) for a public holiday.
Crude Oil Price & Wall Street
Meanwhile, investors increasingly expect to see a production cut deal being made between members of the Organization of the Petroleum Exporting Countries (OPEC) during the meeting on 30 November in Vienna (Austria). Therefore, the crude oil price surged 4 percent to a three-week high on Monday (21/11). This made oil and energy stocks flying.
This jump in oil prices helped pull US stocks to record highs overnight. US stocks were also supported by several corporate deals, with a number of companies in the energy and technology industries making moves. On Monday (21/11) the Dow Jones industrial average gained 0.5 percent, the Standard & Poor's 500 index rose 0.7 percent, while the Nasdaq composite rose 0.9 percent.
Meanwhile, US president-elect Donald Trump provided some more information about his future policies. Trump confirmed he wants the USA to exit the Trans-Pacific Partnership as he considers this free trade deal a disaster for the US economy. Trump also wants to reduce regulations that limits energy producers and calls for an investigation into abuses of the nation's immigration program. Trump is scheduled to be inaugurated on 20 January 2017.
Trump's victory in the 2016 US presidential election caused major volatile movements across global financial markets (with capital outflows from emerging markets). Investors believe his economic policies (cutting taxes and boosting fiscal spending) will strengthen the US economy and give rise to accelerating inflation. Therefore, a new Fed Funds Rate hike could come as soon as December 2016.
Political Stability Indonesia
Investors have been concerned about the rising ethnic and religious tensions in Indonesia ahead of the Jakarta gubernatorial election in February 2017. There are rumors of more "anti-Ahok" demonstrations (perhaps even with subversive intentions). However, yesterday's statements from Indonesian Police have somewhat eased these concerns. National Police officially banned another protest rally that was planned for 2 December 2016 for the sake of public order (a massive demonstration staged on 4 November 2016 had ended in chaos and riots). This statement shows that Indonesian authorities are willing to flex their muscles and not let radical Islamic voices "rule the country".
By 10:45 am local Jakarta time the Jakarta Composite Index had climbed 0.39 percent to 5,168.16 points. The Indonesian rupiah, however depreciated 0.19 percent to IDR 13,431 per US dollar (Bloomberg Dollar Index).