On Monday morning (08/12), the Indonesian rupiah exchange rate quickly plunged after the release of weak macroeconomic data from Japan and China, two important trading partners of Indonesia. Economic growth in Japan, the world’s third-largest economy, contracted 0.5 percent (quarter-to-quarter) in Q3-2014, while Chinese imports fell 6.7 percent (year-on-year) in November 2014. As a result the Indonesian rupiah had depreciated 0.54 percent to IDR 12,365 per US dollar by 11:30 am local Jakarta time, the weakest level in six years.

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Indonesia’s Finance Minister has signed a memorandum of understanding (MoU) in the context of Indonesia’s participation within the Asian Infrastructure Investment Bank (AIIB). The AIIB is a new multilateral international financial institution (initiated by China) that is to provide funds for infrastructure projects in the Asia Pacific region. This new institution is seen as a challenge to the World Bank, International Monetary Fund (IMF), and Asian Development Bank (ADB) which are all regarded as being dominated by developed countries.

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Irvan Kamal Hakim, Director at Krakatau Steel (Indonesia’s largest steel manufacturer), said that the domestic steel industry is still affected by prolonged concerns about excess steel supply in China, the world's largest steel producer. Amid slowing economic growth in the world’s second-largest economy, domestic steel demand in China has declined resulting in a global oversupply of 525 million tons. Each 1 percent decline in GDP growth in China results in an additional oversupply of 24 million tons of steel.

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Exports of Indonesian crude palm oil (CPO) and its derivatives increased 45.8 percent month-on-month (m/m) to 2.47 million metric tons in October 2014 primarily supported by the zero export tariff that was implemented by the Indonesian government per 1 October. Indonesia has a mechanism that when the average CPO price (which is calculated using international and local CPO prices) drop below USD $750 per metric ton, the export tax is scrapped. In early September, Malaysia had already implemented a zero CPO export tax.

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Statistics Indonesia announced on Wednesday (05/11) that economic growth in Indonesia reached 5.01 percent year-on-year (y/y) in the third quarter of 2014. This result was slightly below analysts’ forecasts and implies that the slowing trend of economic expansion in Southeast Asia’s largest economy continues. Since 2011, gross domestic product (GDP) growth has been declining amid global and domestic developments. The 5.01 percentage point GDP growth in Q3-2014 was the slowest quarterly growth pace in five years.

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Indonesian crude palm oil (CPO) producers have released good corporate earnings over the first nine months of 2014. Below, we have presented an overview of those CPO producers, listed on the Indonesia Stock Exchange, that have already released their financial results. Combined, these eleven companies recorded net profit growth of 155.3 percent year-on-year (y/y). The main reason for this improved performance was the 24 percent (average) increase in global CPO prices as the commodity gained popularity as an energy source.

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Economic growth in Indonesia is expected to continue to slow in the third quarter of 2014 according to the country’s central bank. Bank Indonesia Deputy Governor Perry Warjiyo said on Thursday (30/10) that the institution believes gross domestic product (GDP) growth of Southeast Asia’s largest economy to reach 5.1 percent year-on-year (y/y) in Q3-2014, similar to the GDP growth result in the previous quarter (5.12 percent, y/y). Main reason for this slowing pace is the sluggish global economy and particularly the case of China.

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Contrary to most other (agricultural) commodities, the global price of cocoa has increased in the second half of 2014. While prices of commodities such as oil, soybeans, corn and wheat have eased due to robust global supply, and others - such as cotton - have eased amid lower global demand, the price of cocoa has been rising steadily. Despite a weak start in 2014, the cocoa price has grown over 10 percent (after having rallied around 25 percent in 2013). Main reason for this performance is the world’s rising cocoa demand.

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On 26 October 2014, 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 and political topics such as last week's inauguration of Indonesia’s seventh President, economic growth, the impact of slowing GDP growth in China, a palm oil update, new rules in the tobacco industry, and more.

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Although stock indices on Wall Street were up on Thursday (23/10) on strong corporate earnings (including Caterpillar and 3M) and economic data (US hiring as well as business’ surveys in Europe that suggest the region may avoid slipping back into a recession), it failed to push emerging market stocks higher on Friday (24/10). Indonesia’s benchmark stock index fell 0.60 percent to 5,073.07. Meanwhile, the Indonesian rupiah exchange rate depreciated 0.05 percent to IDR 12,069 per US dollar (Bloomberg Dollar Index).

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Worldwide, most stock indices fell on Wednesday (07/08), particularly Japan's Nikkei index, after it has been speculated that the Federal Reserve may phase out the third round of its quantitative easing program in September 2013. This program, involving a monthly USD $85 billion bond-buying package, aims to spur US economic growth while keeping interest rates low. However, one important side effect has been rising stock markets around the globe. Now the end of QE3 is in sight, investors shy away from riskier assets.

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As I stated before, mixed sentiments continue to influence the performance of Indonesia's main stock index (IHSG). During Thursday's trading day (01/08), the index moved sideways. News that the Federal Reserve intends to continue its bond-buying program made a good impact. However, this positive sentiment was offset by the release of Indonesia's high July inflation rate as well as the country's continued trade deficit. At the end of the day, the IHSG managed to post a gain as it received support from rising stock indices in Asia.

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IHSG akhir pekan lalu kembali ditutup terkoreksi 0,3% atau 15 poin di 4658,874. Nilai transaksi di Pasar Reguler kembali menipis hanya Rp.3 triliun dibandingkan rata-rata harian pekan lalu yang mencapai Rp.3,84 triliun. Asing masih mencatatkan nilai penjualan bersih Rp.92,9 miliar. Minimnya insentif positif, rilis laba emiten yang dibawah perkiraan sebelumnya, dan pelemahan rupiah atas dolar AS telah menjadi pemicu penurunan indeks. Dilihat sepekan IHSG terkoreksi 1,39% dan rupiah melemah 1,94% di Rp.10265/US dolar. 

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Indonesia's Composite Index (IHSG), the main stock index of Indonesia, went back into negative territory on Wednesday (24/07) with all sectors closing in the red. Worst performing sectoral indices were construction, agriculture and the miscellaneous industry. This development was in line with the Asian region that showed mixed performances after HSBC's Chinese manufacturing PMI contracted. Stock indices in Europe and the United states, that both close hours after the IHSG ends its daily session, were more positive on Wednesday.

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Indonesia's main stock index (IHSG) was not able to continue yesterday's rise as investors, particularly domestic investors, engaged in profit taking. Foreign investors, who were net buyers of Indonesian assets, were not able to guide the IHSG to positive territory. Mixed Asian stock indices, responding to weak Chinese data, did not support Indonesia's index. Moreover, market participants expect that the rupiah will continue its weakening trend and have begun speculating whether the benchmark interest rate (BI rate) will be raised again.

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Yesterday's rising indices on Wall Street, high expectations of companies' financial reports and positive statements regarding economic growth in China resulted in a good day at the Indonesia Stock Exchange (IDX). Indonesia's main stock index, the IHSG, rose 1.88 percent to 4,767.16 on Tuesday (23/07), even though technical indicators seemed to predict a weakening of the index. Also the continued fall of the Indonesian rupiah did not turn investors away from the market. In fact, foreign investors were net buyers of Indonesian stocks.

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As I wrote before, profit taking in combination with mixed movements of global stock indices resulted in the limited movement of Indonesia's main stock index (IHSG) on Monday (22/07). The IHSG was corrected 0.96 percent to 4,678.98. All of the sectoral indices weakened, except for the plantation and mining sectors. As there were no positive news publications that would make investors buy assets, they decided to engage in profit taking after the IHSG had risen for five consecutive days.

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The Indonesian rupiah (IDR) is experiencing one of its worst losing streaks in a decade. On Friday (19/07), the currency weakened to IDR 10,070 against the US dollar, which implies a devaluation of 4.14% in 2013 so far. The central bank of Indonesia, Bank Indonesia, does all it can to support the currency: the country's lender of last resort supplies dollars to the market triggering the reduction of foreign reserves from USD $105 million at end-May to $98 million at end-June, and raised its benchmark interest rate (BI Rate) by 50 bps to 6.50%.

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Indonesia's main stock index (IHSG) went up 0.89 percent to 4,720.44 on Thursday (18/07). The index was supported by developments in the United States. On Wednesday (17/07), Ben Bernanke spoke to the US Congress and said that the Federal Reserve is likely to continue its bond-buying program in 2013 and may gradually withdraw the quantitative easing program in 2014. But only if economic recovery of the US provides the good context. This message supported the IHSG although foreign investors continued to record a net sale.

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The recovery in global palm oil prices that seemed to have started last spring, has ended. A few months ago, optimism had colored expectations of many analysts as palm oil prices went up about 10 percent between early May and mid-June, after tumbling 30 percent in 2012 (causing that palm oil was one of the worst performing commodities in terms of price growth last year). However, the palm oil price increase earlier this year was merely the result of falling production rates in Indonesia and Malaysia, the world's largest palm oil producers.

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