Stock indices in Asia were mixed on the first trading day of the week. Indonesia’s benchmark Jakarta Composite Index plunged 2.11 percent to 4,120.50 points (a two-year low), while the rupiah (remarkably) appreciated 0.13 percent to IDR 14,674 per US dollar according to the Bloomberg Dollar Index. Meanwhile, European markets were down after opening on Monday (28/09). What influenced these markets today?
Jakarta Composite Index (IHSG):
Markets are again plagued by data from China, the world’s second-largest economy. Concerns about China’s hard landing increased as the country’s industrial profits declined 8.8 percent (y/y) in August 2015, the most in at least four years and down from a 2.9 percent (y/y) fall in the preceding month.
Markets are waiting for other data from China and Japan due this week. These are China’s official September purchasing manufacturing managers’ index (PMI) and the final Caixin/Markit PMI (both due this Thursday), as well as Japan’s industrial production and corporate sentiment.
Due to a strengthening yen, Japan’s export-related shares fell hence dragging down the Nikkei 225 index by 1.32 percent. China’s Shanghai Composite Index continued to exhibit severe volatility. After being down around 1.60 percent in the morning, the index eventually finished 0.27 percent higher.
European markets were were down by concerns over China but also due to the 20 percent slump in Glencore, an Anglo–Swiss multinational commodity trading and mining company, on concern about the combination of low commodity prices and the company’s ability to meet debt targets.
Markets are also eagerly awaiting the release of US non-farm payrolls (due this Friday) for an indication whether US labour market conditions are solid enough to cope with a tighter monetary policy approach. Last week, Federal Reserve Chairwoman Janet Yellen said that the US central bank is still on track to raise US interest rates before the year-end. However, this move remains data-dependent. Strong US GDP growth data (GDP growth in Q2-2015 was revised up to 3.9 percent q/q last Friday), triggering heightened expectation of a Fed Fund Rate hike. Ahead of this looming Fed Fund Rate hike emerging market assets remain under pressure due to persistent uncertainty about the timing of the hike.
Indonesia’s rupiah experienced a volatile day. Several times it touched beyond IDR 14,770 per US dollar but at the end of the trading day it had appreciated 0.13 percent to IDR 14,674 per USD (Bloomberg Dollar Index). It was reported that US dollar-buying by local importers, US dollar demand for debt payments as well as quarter-end foreign fund repatriation plagued the value of the rupiah. Possibly central bank intervention was the reason behind the rupiah’s appreciation in the afternoon.
However, Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) depreciated 0.04 percent to IDR 14,696 per US dollar on Monday (28/09).
Indonesian Rupiah versus US Dollar (JISDOR):| Source: Bank Indonesia