Indonesian stocks and the rupiah are feeling the negative impact of news from the USA. Both Federal Reserve Chairwoman Janet Yellen and New York Federal Reserve President William Dudley said a Fed Fund Rate hike in December is a "live possibility" amid low US employment, continued GDP growth and confidence that inflation will rise to the US central bank's target range. As a result of these remarks gold dropped to a one-month low, stocks declined, while bond yields and the US dollar were pushed higher.
Most emerging market stocks in Asia are weakening on Thursday (05/11) after Yellen's remarks and lower indices on Wall Street overnight. Chinese and Japanese shares were the main exception. Japanese shares rose driven by a depreciating yen (against the US dollar), providing impetus to export-oriented stocks. Meanwhile, Chinese shares are returning to a bull market on recently improved sentiments as economic data suggest some stabilization in the economy while the country's policy-makers take a proactive stance to safeguard achieving China's 7 percent (y/y) growth target for 2015.
However, investors also seem somewhat "Fed-up" with news regarding a possible US interest rate hike and therefore their reaction today is not too strong (moreover weak sentiments are slightly offset by solid gains in China and Japan, while investors are also focused on Indonesia's official Q3-2015 GDP growth figure that will be released later today). By 10:35 am local Jakarta time, Indonesia's benchmark Jakarta Composite Index had only fallen 0.34 percent to 4,596.88 points.
Meanwhile, the Indonesian rupiah had depreciated 0.35 percent to IDR 13,595 per US dollar according to the Bloomberg Dollar Index by 10:35 am local Jakarta time. Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) depreciated 1.05 percent to IDR 13,603 per US dollar on Thursday (05/11).
Indonesian Rupiah versus US Dollar (JISDOR):| Source: Bank Indonesia
Before Yellen's speech overnight, Indonesian assets strengthened on an improvement in sentiment toward Indonesia as inflation eased to an 11-month low, while economic growth is expected to pick up to 4.8 percent in Q3-2015 and government spending gains momentum in the second half of the year.
Today (05/11), Statistics Indonesia (BPS) is set to release the official third quarter gross domestic product (GDP) growth figure at a press conference that is scheduled to start at 11 am local Jakarta time.
Government spending realization in Indonesia, which had been alarmingly weak in the first half of the year, rose to 70 percent of the 2015 State Budget in October. Indonesian President Joko Widodo earlier this week said government spending realization should reach 94 percent (of allocated funds in the 2015 State Budget) by the year-end. Given weak household consumption and sluggish exports, analysts believe that government investment (in infrastructure and other programs) are the main key to boost the country's economic growth (from a six-year low in Q2-2015). Widodo also requested his ministries to start tender auctions for next year's projects.