The Indonesian economy is particularly vulnerable to any kind of global economic turmoil as the country has been plagued by some economic and financial weaknesses. This includes slowing economic growth (since 2011), a wide current account deficit, high inflation, and a heavily depreciating rupiah (against the greenback). Due to the looming Greek default, which may disrupt the whole financial system in the Eurozone, European banks may decide to cut back on their debt holdings in Asia in order to repair their balance sheets from the Grexit (Malaysia currently has the largest exposure to European bank claims). Indonesia’s Jakarta composite Index is also highly vulnerable to global economic turmoil as foreign investors control about 60 percent of stocks that are traded on the Indonesia Stock Exchange.

Alexis Tsipras, Prime Minister of Greece, stunned markets over the weekend by announcing that there will be a referendum (scheduled for 5 July) in which voters will be asked to decide on creditors' reform proposals. It is feared that the electorate will vote against the proposals. The European Union (EU) and International Monetary Fund (IMF) responded by rejecting Greece’s request to extend the bailout beyond the 30 June expiry date, implying that the country is most likely to default on a key payment and thus may need to exit the Eurozone.

Jakarta Composite Index (IHSG):

Throughout Asia and Europe panic selling occurred on the first trading day after unsuccessful negotiations between Greece and its international creditors. These creditors need to see far-reaching reforms in the Greek economy before providing any bailout funds for Greece’s debt payment (1.6 billion euros) to the IMF that is due on 30 June 2015. A default could mean an exit from the euro. Moreover, Greece implemented capital controls to avoid a run on banks. It decided to keep its banks closed for at least a week and to limit the amount of money that can be drawn from ATMs across the country (a maximum of 60 euros per day). As such, investors are in search of safe(r) haven assets such as the US dollar, yen and gold.

Meanwhile, Chinese shares plunged further - despite another interest rate and reserve ratio cuts - as investors continue to pull out of the local market on concern of a possible market bubble. The benchmark Shanghai Composite index fell 3.34 percent to 4,053.03, extending losses from the past two weeks.

Hong Kong's Hang Seng declined 2.6 percent to 25,966.98, Sydney's S&P/ASX 200 fell 2.2 percent to 5,422.50. Seoul's KOSPI was down 1.4 percent to 2,060.49 and India's Sensex fell 1.5 percent to 27,385.05.

Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) depreciated 0.13 percent to IDR 13,356 per US dollar on Monday (29/06).

Indonesian Rupiah versus US Dollar (JISDOR):

| Source: Bank Indonesia