Market Update Indonesia: Why Stocks Rose but the Rupiah Weakened?
In line with other Asian indices, Indonesian stocks rose on Tuesday (26/05). The benchmark Jakarta Composite Index rose 0.62 percent to 5,320.90 points. Positive sentiments did not originate from the USA as US stock markets were closed for a holiday yesterday but primarily stemmed from China where the economic planning agency announced to implement several new policies in a bid to boost the sluggish economy. The rupiah, however, depreciated 0.25 percent to IDR 13,220 per US dollar based on the Bloomberg Dollar Index.
News from China pushed most Asian stock indices into green territory. The government of China announced that it is eager to attract private investment through over 1,000 local public-private partnership (PPP) projects focused on infrastructure development. These projects involve ports and other transportation facilities, as well as the environment, and public services. Reportedly, these +1,000 projects have a combined value of roughly 2 trillion yuan (USD $320 billion). Secondly, China’s government announced it will halve import tariffs on clothing, cosmetics and several other consumer products in a bid to boost consumer spending.
As a result, most Asian stock indices rose including Indonesia. Indonesia’s benchmark Jakarta Composite Index (abbreviated IHSG) rose 0.62 percent:
Jakarta Composite Index (IHSG):
However, the rupiah still continued to weaken amid bullish US dollar momentum. After Janet Yellen announced late last week that the Federal Reserve is still set to raise US interest rates this year (provided that US economic data continue to improve), US dollar demand has risen globally.
Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) depreciated 0.05 percent to IDR 13,192 per US dollar on Tuesday (26/05).
Indonesian Rupiah versus US Dollar (JISDOR):| Source: Bank Indonesia
The Indonesian Finance Ministry sold IDR 7.2 trillion (about USD $545 million) worth of conventional bonds at an auction today (26/05). This result was below the indicative target of IDR 10.0 trillion (USD $758 million). Total incoming bids reached IDR 11.9 trillion and the highest bid-to-cover ratio was 1.81 for the 19-year bonds.