After the Federal Reserve announced that it kept its key interest rate at the historically low level of 0.0-0.25 percent at the September policy meeting, most of Asia’s emerging market stocks were up on relief that their currencies are not to depreciate heavily (yet) due to the looming rate hike. Yesterday (17/09), the US central bank said it postponed further monetary tightening due to weakness in the global economy, unsettled financial markets, and low US inflation. However, a Fed Fund Rate hike is still likely to occur before the year-end.

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Contrary to mostly rising Asian and global stock indices, Indonesia’s benchmark Jakarta Composite Index (IHSG) fell 0.34 percent to 4,332.51 points on Wednesday (16/09) as the rupiah continues to slide against the US dollar causing concern about corporate earnings of listed companies on the Indonesia Stock Exchange and eroding the value of Indonesian assets purchased by foreign investors. Outside Indonesia most markets were up as investors are in anticipation of a crucial two-day Federal Reserve policy meeting (16-17 September).

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Indonesian stocks and the rupiah are having a tough day as investors are cautious ahead of the Federal Reserve’s two-day policy meeting (16-17 September), while Indonesia’s August 2015 trade surplus was slightly below analysts’ expectations. By 14:40 pm local Jakarta time, Indonesia’s benchmark Jakarta Composite Index had weakened 1.17 percent to 4,339.07 points, while the Indonesian rupiah had depreciated 0.47 percent to IDR 14,401 per US dollar (Bloomberg Dollar Index).

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While most Asian stock indices were mixed, Indonesia’s benchmark Jakarta Composite Index rose 0.69 percent to 4,390.37 points on Monday (14/09) with foreign investors recording a net buy of IDR 91.2 billion (approx. USD $6.5 million). Meanwhile, ahead of a crucial Federal Reserve meeting, the Indonesian rupiah depreciated 0.08 percent to IDR 14,333 per US dollar according to the Bloomberg Dollar Index.

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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.

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Indonesian stocks and the rupiah started strong on Wednesday (09/09). Immediately after opening the benchmark Jakarta Composite Index rose over one percent to 4,366 points, while the rupiah appreciated 0.25 percent to IDR 14,244 per US dollar (Bloomberg Dollar Index) as these assets were supported by positive global sentiments after there had occurred a rally in most global equity markets on Tuesday (08/09).

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Most Asian stock markets finished lower on Monday (07/09) on persistent concern about the hard landing of China’s economy and the (related) selloff on European and US markets that occurred at the end of last week. Meanwhile, most Asian currencies depreciated (against the US dollar) after a US jobs report (released last Friday) could make the Federal Reserve decide to raise short-term interest rates later this month. All in all, investor sentiment remains fragile.

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Saham dan rupiah Indonesia memiliki awal yang buruk pada Senin pagi. Pada pukul 9.35 Waktu Indonesia Barat (WIB), Indeks Harga Saham Gabungan (IHSG) telah jatuh 0,99% menjadi 4.371,49 poin, sementara rupiah telah melemah 0,45% menjadi Rp 14.236 per dollar Amerika Serikat (Bloomberg Dollar Index).

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Saham-saham Indonesia dan rupiah sedikit melemah pada Jumat sore (04/09). Mirip dengan kemarin, hari ini terjadi perdagangan yang relatif tenang (kemungkinan disebabkan karena pasar di Shanghai sedang tutup karena liburan dan karenanya membatasi penyebaran volatilitas yang besar). Pada pukul 15:20 WIB Indeks Harga Saham Gabungan (IHSG) turun 0,48% menjadi 4.411,99 poin sementara rupiah telah melemah 0,07% menjadi Rp 14.180 per dollar Amerika Serikat (berdasarakan Bloomberg Dollar Index).

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Global markets are again facing rough times after China’s manufacturing activity fell to a three-year low in July 2015, yet another sign that the world’s second-largest economy is slowing faster than earlier estimated (and this surely impacts negatively on the global economy). Concerns about China led to plunging stock indices from Japan to New York on Tuesday (01/09). Moreover, International Monetary Fund (IMF) Managing Director Christine Lagarde, who is on a visit in Indonesia, said the IMF may soon cut its forecast for global economic growth in 2015 again (from 3.3 percent currently).

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Despite technical indicators suggesting further upward movement of Indonesia's benchmark stock index (known as the Jakarta Composite Index or IHSG), a positive performance of the index was blocked by external factors. Several Asian stock indices were down responding to Markit's lower US manufacturing PMI (slipping to 55.5 from 57.1 in February 2014). Similarly, China and the Eurozone's manufacturing data showed slowing growth. Continued appreciation of the rupiah exchange rate managed to limit the decline of the IHSG.

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At the start of the new week, Indonesia's benchmark stock index (Jakarta Composite Index or IHSG) was able to continue to climb, supported by positive Asian indices. Today, investors took advantage of discounted stocks in Asia as markets had fallen after the Federal Reserve's announcement last week that the quantitative easing program would be wound down further as well as a possible US interest rate hike in 2015 and 2016. However, the IHSG was also vulnerable to profit taking. Therefore, today's gain was limited.

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The US Federal Reserve's plan to increase interest rates is a serious threat to the stock and bonds markets of emerging markets, including Indonesia, in 2014. The higher Fed Fund rate will result in a high cost bonds-climate in Indonesia. The Federal Reserve announced on Wednesday (19/03) that it continues to cut its quantitative easing program (QE3) by USD $10 billion in March 2014 as well as aims for an interest rate hike six months after the 'tapering' has ended. With the current pace, QE3 is expected to end in December 2014.

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We expected that Indonesia's Jakarta Composite Index (the country's benchmark stock index also known as IHSG) would continue to weaken on Wednesday's trading day (19/03) but net buying by foreign investors managed to push the index back into green territory. During the first two days of this week, the IHSG fell as euphoria over Joko Widodo's announcement to run for president in the 2014 elections faded. Last week, the market showed that they approve of Widodo as the IHSG climbed 3.23 percent on Friday (14/03).

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Previously we were hoping that if global stock indices would turn positive, it could limit the fall of Indonesia's benchmark stock index (Jakarta Composite Index or IHSG) as the 'Jokowi effect' has definately worn off. On Tuesday (18/03), investors continued to engage in profit taking causing the IHSG to plunge 1.45 percent to 4,805.61 points. While most Asian indices were up, influenced by rising indices on Wall Street and in Europe on the previous trading day (17/03), the IHSG deviated sharply from the Asian trend today.

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There were two options with regard to today's trading day (Monday 17 March 2014). First, the Jakarta Composite Index (Indonesia's benchmark stock index also known as IHSG) could rise further after its impressive 3.23 percent jump last Friday (14/03), and secondly, the bullish market could become vulnerable to profit taking as the 'Jokowi effect' tones down and no other factors could trigger positive market sentiments. It turned out to be the second option. Not even sharp rupiah appreciation could push the index in the green zone.

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Despite technical indicators pointing toward a potential rise of Indonesia's benchmark stock index (known as the Jakarta Composite Index or IHSG), foreign net selling on Wednesday's trading day (12/03) caused the 0.42 percent decline to 4,684.38 points. Only two sectors recorded a positive performance today: consumer goods and property. Companies that did particularly well were Danayasa Arthatama, Metropolitan Land, Agung Podomoro Land, Siantar Top, and Kedawung Setia Industrial.

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Although we advise investors to remain careful as any negative sentiment will be used as a valid reason for profit taking, Indonesia's benchmark stock index (Jakarta Composite Index or IHSG) was up from the start of the trading day on Tuesday (11/03). The start of dividend payouts helped to offset concerns about possible interest rate hikes (in emerging markets) as well as the impact of weak indices on Wall Street and Europe on Monday (10/03). Asian stock indices, however, were positive on Tuesday, thus providing support for the IHSG.

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At the start of the week, Indonesia's benchmark stock index (the Jakarta Composite Index of IHSG) has the tendency to decline as market participants are eager to engage in profit taking. The release of China’s weak export data (resulting in a trade deficit) at the end of last week in combination with the widening current account deficit of Japan (and its slowing GDP growth) provided enough reasons for investors to opt for profit taking. Moreover, Asian stock markets were in the red and were thus unable to support the IHSG.

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ICRA Indonesia, an independent credit rating agency and subsidiary of ICRA Ltd. (associate of Moody's Investors Service), publishes a monthly newsletter which provides an update on the financial and economic developments in Indonesia of the last month. In the February 2014 edition, a number of important topics that are monitored include Indonesia's inflation rate, the trade balance, the current account deficit, the IDR rupiah exchange rate, and gross domestic product (GDP) growth. Below is an excerpt of the newsletter:

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