Indonesia Stock Market & Rupiah Update: China & Fed Hike in Focus
Indonesian stocks and the rupiah weakened on Monday morning (30/11). Indonesia's benchmark Jakarta Composite Index (IHSG) was down 0.84 percent to 4,522.09 points, while the Indonesian rupiah had depreciated 0.21 percent to IDR 13,830 per US dollar (Bloomberg Dollar Index) by 11:15 am local Jakarta time. Negative sentiments still stem from China and the looming Fed Fund Rate hike in December, while there are few to none domestic sentiments that can support the nation's assets.
Asian markets are down as investors are cautiously monitoring developments in China where stocks extended last week's losses. Chinese authorities are fading out policies implemented in July in support of local stocks when the country was plagued by the Chinese stock market crash (for example the resumption of initial public offerings in China). Last Friday, Chinese shares plunged after news agency Reuters reported that China Haitong Securities is under investigation by the China Securities Regulatory Commission (CSRC) - probed for possible violation of securities regulations - following similar probes into two other Chinese brokers. Furthermore, concerns about the economic slowdown of the world's second-largest economy linger on and are expected to persist through the first half of 2016.
Meanwhile, China's yuan erased early losses on Monday and swung into positive territory ahead of an International Monetary Fund (IMF) decision (later today) on whether or not to promote the yuan into a basket of its global reserve currencies. It is suspected that China's central bank intervened to support its currency.
Ahead of looming monetary tightening in the USA (and concern about China) investors prefer to invest in safe haven assets, at the expense of emerging market assets. Moreover, low commodity prices are a persistent problem for Indonesia as it undermines economic growth of the nation that is - to a high degree - dependent on commodity exports.
Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) depreciated 0.68 percent to IDR 13,840 per US dollar on Monday (30/11).
Indonesian Rupiah versus US Dollar (JISDOR):| Source: Bank Indonesia
Tomorrow, Indonesia's Statistics Agency (BPS) will release several important economic data, including November inflation and the November trade balance. There is optimism that Indonesia's inflation will ease to about 3 percent (y/y) at the year-end, implying that purchasing power strengthens. Meanwhile, in October 2015 Indonesia recorded the eleventh straight monthly surplus. Overall, Indonesia's trade balance reached USD $8.16 billion in the January-October 2015 period. However, as this surplus is primarily supported by drastically falling imports, there remain concerns about the trade balance. Sharply falling imports and dramatically declining exports signal that global and domestic economic activity weakens.