Asian stocks did not have a good start of the week. Most Asian stocks fell on Monday (25/04) in line with retreating oil prices, concerns that the US Federal Reserve may be hinting at further monetary tightening in its upcoming policy meeting, as well as concerns about China's debt and commodities markets. It all resulted in curbed demand for higher-yielding yet riskier Asian assets. Indonesia's benchmark Jakarta Composite Index fell 0.73 percent to 4,878.86 points, while the Indonesian rupiah depreciated 0.04 percent to IDR 13,199 per US dollar (Bloomberg Dollar Index).
Chinese stocks continued to decline - extending last week’s drop - after commodity exchanges in the world's second-largest economy moved to cool trading in raw materials after turnover of steel rebar futures reached 606 billion yuan late last week (surpassing China's full-year steel rebar production figure). China's corporate and individual investors seem to bet on a major jump in infrastructure spending having a positive effect on commodities such as steel and iron ore, thus turning their backs to equities (that crashed dramatically last summer). However, this sudden appetite for commodities futures in China could be the beginning of a new crash as the price upswings are not supported by strong fundamentals.
Meanwhile, China's yuan is coming close to its longest stretch of losses in two months after weakening again on Monday (25/04).
Analysts also believe that global investors are cautious ahead of the Federal Reserve's two-day policy meeting that is set to start on Tuesday (26/04) as US policy makers are still expected to raise rates twice this year. Although few people expect a rate hike this week, the Fed may provide details about a rate hike later this year. Also, the central banks of Japan and Australia are set to conduct their monthly policy meetings this week. Japanese stocks declined today, despite the yen hitting a three-week low against the US dollar, on expectation that the Bank of Japan could start lending to banks at negative rates.
Lastly, crude oil has a major influence on the performance of Asian stocks. The rally that occurred in emerging market assets since February 2016 is linked to the recovering oil prices. Today, however, after three weeks of gain, oil prices slipped on the strong US dollar and traders' appetite for profit-taking. Brent crude oil (June settlement) fell 1.6 percent to USD $44.41 per barrel. This caused weak demand for emerging assets on today's trading day.
Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR)
depreciated 0.50 percent to IDR 13,235 per US dollar on Monday (25/04).
Indonesian Rupiah versus US Dollar (JISDOR):| Source: Bank Indonesia