16 September 2019 (closed)
USD/IDR (14,085) -14.00 -0.10%
EUR/IDR (15,570) +14.13 +0.09%
Jakarta Composite Index (6,219.44) -115.41 -1.82%
Indonesian assets produced a strong finish on Friday (20/11). The benchmark Jakarta Composite Index and rupiah both strengthened considerably on increased certainty about the timing of higher US interest rates, while China announced it implemented more measures to encourage economic growth, giving rise to a stronger yuan (supporting stronger emerging currencies in Asia). Indonesian stocks rose 0.94 percent to 4,561.33 points, while the rupiah appreciated 1.10 percent to IDR 13,623 per US dollar (Bloomberg Dollar Index).
After reading the latest Federal Reserve minutes, Asian markets welcomed hints that the US Federal Reserve is to raise its Fed Fund Rate modestly in December 2015 (which would be the first hike since 2006). Although higher US interest rates should result in capital outflows from the more risky emerging markets (as US yields become more attractive), for now, increased certainty about the timing of the Fed Fund Rate causes increased risk appetite.
Federal Reserve Vice President Stanley Fischer said the Fed has done all it can to avoid surprising the markets, adding that several key central banks could hike its interest rate policy from near zero in the near future.
Meanwhile, the central bank of China took another step to boost growth and combat deflationary pressures when it cut the overnight lending facility rate from 4.5 percent to 2.75 percent, and the seven-day bank-loan rate from 5.5 percent to 3.25 percent.
The euro currency weakened to a seven-month low versus the US dollar after European Central Bank (ECB) President Mario Draghi hinted at providing additional monetary easing. Japan may also still decide to step up stimulus.
However, the US dollar weakened against many other currencies as investors engaged in profit taking after markets increasingly believe that the Fed will take a long time to gradually raise its key rate, making US dollar assets less attractive.
Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) appreciated 0.35 percent to IDR 13,739 per US dollar on Friday (20/11).
Indonesian Rupiah versus US Dollar (JISDOR):| Source: Bank Indonesia
The domestic factors that give rise to stronger Indonesian assets include easing inflation, a lower current account deficit, faster government spending in the second half of 2015, the recent economic stimulus packages unveiled by the government, Bank Indonesia's decision to cut the primary minimum statutory reserves from 8.00 percent to 7.50 percent, and the OJK's statement that it may make the issuance of bonds easier for local companies.
Jakarta Composite Index (IHSG):
Obviously because today, Nov 24 the Indonesian government is giving money to poor people. Yes, long lines have formed to get money. Why are other governments of the world so stingy?