Indonesian stocks and the rupiah started weak on Thursday morning (10/09), the day after the Indonesian government unveiled its first economic policy package. In line with the trend in the whole region this morning, most (emerging market) assets in Asia are declining on weak Chinese and Japanese economic data. These weak data cause heightened concern about sluggish global economic growth.
By 10:30 am local Jakarta time the benchmark Jakarta Composite Index was down 0.29 percent to 4,335.68 points. The rupiah had depreciated 0.45 percent to IDR 14,326 per US dollar (Bloomberg Dollar Index) by the same time, while Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) depreciated 0.55 percent to IDR 14,322 per US dollar.
Indonesian Rupiah versus US Dollar (JISDOR):| Source: Bank Indonesia
Although China's August inflation pace (2 percent y/y) beat analysts’ expectations, the country’s producer prices fell for the 42nd consecutive month implying that there are still deflationary pressures in the world’s second-largest economy. As a result, the Shanghai Composite Index was down around one percent on Thursday morning.
Meanwhile, in Japan - after yesterday staggering rally (+7.71 percent) - stocks fell as the country’s core machinery orders declined 3.6 percent (month-on-month) in July, missing expectations (3.7 percent). The Nikkei 225 Index was down 2.49 percent in morning trade.
Investors are also still cautious ahead of the Federal Reserve’s FOMC meeting, scheduled for 16-17 September 2015. If the US central bank decides to introduce higher US interest rates, emerging assets, including Indonesian assets, will most likely be affected.
The announcement of the government’s first economic policy package on Wednesday could not offset the current negative external influences. Partly, because investors need to see such programs materialize first before becoming too enthusiastic as history shows that it is highly complex to implement such policy packages successfully in Indonesia due to its tough and inefficient bureaucratic system.