Most Asian stock markets finished lower on Monday (07/09) on persistent concern about the hard landing of China’s economy and the (related) selloff on European and US markets that occurred at the end of last week. Meanwhile, most Asian currencies depreciated (against the US dollar) after a US jobs report (released last Friday) could make the Federal Reserve decide to raise short-term interest rates later this month. All in all, investor sentiment remains fragile.
Currently, all news that comes from China causes negative market sentiments. As such, investors cautiously await China’s trade data (scheduled to be released tomorrow). Today, China’s National Bureau of Statistics revised down the country’s 2014 gross domestic product growth (GDP) from 7.4 percent (y/y) to 7.3 percent (y/y). This was another additional factor that caused the Shanghai Composite Index to fall and continue its highly volatile behaviour. On Monday the index had fallen 2.52 percent by the end of the trading day. Meanwhile, China's yuan weakened against the US dollar despite a firmer guidance rate of China’s central bank.
After the market had closed, China announced that the nation's foreign-exchange reserves declined by USD $93.9 billion in August from the preceding month as China’s central bank used forex to intervene in the currency market to support the yuan while preventing capital outflows (in mid-August China had decided to devalue its yuan in order to boost the nation’s sluggish export performance but as this move was regarded as a sign that the nation’s economy is weaker than expected it led to severe outflows).
Although US unemployment fell to a seven-year low in August (which is decent enough to support calls for a US interest rate hike in September), it was also announced that US employers added fewer jobs than previously forecast. As such, investors are still plagued by uncertainty about the timing of higher US interest rates. On 16-17 September 2015, the Federal Reserve is scheduled to conduct its next two-day policy meeting to discuss monetary policy. Higher US interest rates will most likely result in capital outflows from emerging markets, including Indonesia, and boost the US dollar as the greenback becomes more attractive to yield-seekers. Based on the Bloomberg Dollar Index, the rupiah depreciated 0.66 percent to IDR 14,266 per US dollar on Monday.
Amid weak sentiments Indonesia’s benchmark stock index (Jakarta Composite Index) fell 2.58 percent to 4,301.37 points on Monday.
Jakarta Composite Index (IHSG):
Lastly, although released after Indonesian markets had closed today, Indonesia’s foreign exchange reserves declined from USD $107.55 billion to USD $105.35 billion at the end of August 2015. The central bank (Bank Indonesia) used part of the reserves to support the ailing rupiah (which is the second-worst performing Asian currency, after Malaysia’s ringgit, so far in 2015).
Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) depreciated 0.39 percent to IDR 14,234 per US dollar on Monday (07/09).