Immediately after the opening of trade on Wednesday (10/06), Indonesian stocks rebounded sharply. Yesterday, Indonesia’s benchmark stock index (Jakarta Composite Index) had fallen 2.30 percent due to worries about looming higher US interest rates later this year, the Greek debt crisis in the Eurozone, heavy rupiah depreciation, and weak domestic macroeconomic data (such as Indonesia’s high inflation, disappointing Q1-2015 economic growth, the still wide current account deficit, and the central bank’s falling forex reserves).
Although these factors have not really changed on today’s trading day, we see a technical rebound as Indonesian stocks are now relatively cheap. By 10:50 am local Jakarta time, the Jakarta Composite Index had risen 1.31 percent to 4,964.11 points.
The only change (but not a structural one) is the performance of the rupiah. On Monday (08/06), the rupiah depreciated 0.71 percent to IDR 13,385 per US dollar according to the Bloomberg Dollar Index, a level last seen in the aftermath of the Asian Financial Crisis in 1998. For foreign investors severe rupiah depreciation is a significant problem as it erodes yields. Therefore, foreign investors were eager to engage in profit-taking the following day by selling Indonesian stocks before profits would vaporize. However, yesterday (09/06), the rupiah appreciated 0.58 percent (Bloomberg Dollar Index), partly on a weaker US dollar and (probably) some intervention in the foreign exchange market by Bank Indonesia, making it more attractive to hunt for relatively cheap Indonesian stocks on today’s trading day.
That yesterday’s strong performance of the rupiah is not structural (as most currencies are depreciating against the bullish US dollar ahead of further monetary tightening in the USA) is shown by today’s performance: by 10:50 am local Jakarta time the rupiah had depreciated 0.21 percent to IDR 13,335 per US dollar based on the Bloomberg Dollar Index.
However, Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) appreciated 0.25 percent to IDR 13,329 per US dollar on Wednesday (10/06) as it still had to absorb yesterday’s developments that led to a stronger rupiah.