Apart from external factors (China’s weak manufacturing activity and persistent uncertainty about the timing of higher US interest rates) that plague Indonesian assets today, there are also domestic factors that push Indonesian stocks and the rupiah into the red. These domestic factors include Indonesia’s downgraded economic growth forecasts and the central bank’s downgraded rupiah outlook. Meanwhile, Indonesia’s foreign exchange reserves - used to defend the rupiah - have declined further.

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Bank sentral Indonesia (Bank Indonesia) memperkirakan bahwa inflasi akan menurun di bawah 7% pada basis year-on-year (y/y) di bulan September 2015 akibat harga bahan-bahan pangan yang rendah dan menurunnya harga-harga yang ditetapkan (termasuk bahan bakar dan listrik) setelah periode Ramadan dan Idul Fitri. Gubernur Bank Indonesia Agus Martowardojo mengatakan bank sentral memprediksi inflasi mencapai sekitar 6,95% (y/y) di bulan September.

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Pada 20 September 2015, Indonesia Investments menerbitkan edisi terbaru dari newsletter-nya. Newsletter gratis ini, yang dikirimkan kepada para pelanggan kami sekali setiap minggunya, berisi berita-berita paling penting dari Indonesia yang telah dilaporkan di website kami dalam tujuh hari terakhir. Kebanyakan topik berkaitan dengan isu-isu ekonomi seperti dampak dari kebijakan moneter Federal Reserve Amerika Serikat terhadap aset-aset Indonesia, suku bunga acuan Indonesia, neraca perdagangan, hutang luar negeri, sektor perbankan, kemiskinan, dan banyak lagi.

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In line with expectation, the central bank of Indonesia (Bank Indonesia) decided to keep its key interest rate (BI rate) at 7.50 percent for a seven consecutive month in September’s Board of Governor’s meeting (17/09) as it aims to stabilize the rupiah amid global volatility caused by looming higher US interest rates and China’s hard landing (as well as yuan depreciation), while combating inflation which stood at 7.18 percent (y/y) in August. The overnight deposit facility rate and lending facility rate were left unchanged at 5.5 percent and 8 percent, respectively.

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With all eyes on the two-day policy meeting of the Federal Reserve, we could almost forget that the central bank of Indonesia (Bank Indonesia) will also hold its monthly policy meeting today. Similar to the topic discussed in the Federal Open Market Committee (FOMC) meeting (16-17 September), Bank Indonesia may consider raising its key interest rate (BI rate) as a Fed Fund Rate hike would trigger capital outflows, while Indonesia’s inflation rate remains high and the rupiah is fragile.

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For the second time, the central bank of Indonesia (Bank Indonesia) cut its 2016 forecast for economic growth in Indonesia, Southeast Asia’s largest economy. Due to persistent low commodity prices and weak export figures, the central bank now estimates that Indonesia’s economy will grow in the range of 5.2 - 5.6 percent (y/y) next year, down from its earlier outlook of 5.3 - 5.7 percent and the initial outlook of 5.4 - 5.8 percent.

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Kebanyakan analis memprediksi bahwa inflasi Indonesia akan berakselerasi menjadi sekitar 7,43% pada basis year-on-year (y/y) di bulan Agustus terutama karena inflasi impor. Karena rupiah melanjutkan pelemahan terhadap dollar Amerika Serikat (AS) selama beberapa minggu terakhir sementara Pemerintah Pusat baru-baru ini menaikkan beacukai impor untuk macam-macam produk konsumen, tekanan inflasi diprediksi untuk meningkat.

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On 23 August 2015, Indonesia Investments released the latest edition of its newsletter. This free newsletter, which is sent to our subscribers once per week, contains the most important news stories from Indonesia that have been reported on our website in the last seven days. Most of the topics involve economic subjects such as Indonesian stocks and the rupiah, the July trade balance, Bank Indonesia’s interest rates, the 2016 State Budget draft, geothermal power development, land rights available to foreign investors, and more.

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Just before the market closed on Tuesday (18/08) the Indonesian rupiah experienced a remarkable recovery, signalling that the country’s central bank (Bank Indonesia) intervened to support the ailing currency (after Malaysia’s ringgit, the rupiah is the second-worst performing emerging currency in Asia so far this year, weakening 11.2 percent against the US dollar). Today, based on the Bloomberg Dollar Index, the Indonesian rupiah was gradually falling toward IDR 13,860 per US dollar until it suddenly appreciated markedly.

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For the sixth straight month, the central bank of Indonesia (Bank Indonesia) left its interest rate regime unchanged at Tuesday’s Board of Governor’s meeting (18/08) as it aims to guard the rupiah against severe volatility (which occurred after China’s yuan was allowed to devalue, while markets are still preparing for monetary tightening in the USA) and tries to combat inflation.

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It seems that the Indonesia Stock Exchange (IHSG) was blessed by the Chinese new year celebrations as it closed higher on Monday than on the previous trading day. This is a better performance than usual on the days around the new year. If we take a look at the period 2008-2012, the IHSG declined three times on the day before new year, and twice on the day after. This year, the IHSG declined on the day before by -0.26% and increased by 0.27 on the day after.

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