Indonesia's benchmark Jakarta Composite Index (IHSG) rose 0.24 percent to 4,708.62 points, while the Indonesian rupiah appreciated 0.52 percent to IDR 13,439 per US dollar (Bloomberg Dollar Index) on Monday (22/02) amid mostly rising emerging market stocks and appreciating emerging market currencies. Investor appetite for riskier assets was triggered by higher global oil prices and rallying Chinese shares (brought about by optimism after the appointment of a new chairman of the China Securities Regulatory Commission.
Indonesia's mining index outperformed the benchmark index by rising 2.6 percent on Monday. This remarkable performance was the result of higher oil prices giving rise to higher energy stocks. Russia and the OPEC are still expected to reach an agreement regarding the 'oil output freeze'. Talks will be continued on 1 March 2016. Today, Benchmark Brent crude futures rose 1.9 percent to USD $33.66 per barrel after having dropped 4.3 percent over the previous two trading sessions. Meanwhile, West Texas Intermediate rose 2.73 percent to USD $30.45 per barrel.
However, it were domestic investors that managed to cause a rising Jakarta Composite Index as foreign investors recorded a net sell of IDR 535 billion (approx. USD $40 million). Foreign investors seem concerned about the expensive Indonesian assets (overvaluation) after large capital inflows into Southeast Asia's largest economy occurred over the past couple of weeks. Data from Credit Suisse show that Indonesia's valuation premium has grown to 66 percent versus other Asian emerging markets (price-to-book versus return-on-equity basis).
Meanwhile, China's Shanghai Composite Index led gains in Asia (and provided support for gains of other Asian indices), rising 2.35 percent to a one-month high. Positive market sentiments stemmed from the appointment of Liu Shiyu (former Chairman of Agricultural Bank of China Ltd.) as the new chairman of the China Securities Regulatory Commission (replacing Xiao Gang who was removed from this position over the weekend due to the weak performance of China's financial markets since last summer). Next week, China's political and financial authorities will meet to discuss the country's new five-year economic plan.
The Indonesian rupiah appreciated 0.52 percent against the US dollar to IDR 14,439. Most emerging market currencies appreciated against the US dollar on the back of higher oil prices and market participants' confidence in the economic fundamentals of Indonesia, evidenced by two consecutive interest rate cuts conducted by Bank Indonesia in the January and February policy meetings.
Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR)
appreciated 0.66 percent to IDR 13,460 per US dollar on Monday (22/02).
Indonesian Rupiah versus US Dollar (JISDOR):| Source: Bank Indonesia