This weaker projection can impact on the performance of companies listed on the Indonesia Stock Exchange, especially those that import plenty of products and/or have significant US dollar-denominated debt.

Since mid-January 2017 the Indonesian rupiah has been very stable against the US dollar. This recent performance is in stark contrast to the rupiah performance in the years before when it showed severe volatility (in combination with significant weakening between mid-2013 and October 2015 due to US monetary policy).

Although the recent stable rupiah is - in essence - a positive matter, there do loom some risks. For example, amid recent ("seemingly structural") rupiah stability, Indonesian companies can become less interested to engage in (costly) hedging. If, later on, the rupiah does depreciate significantly (due to unforeseen developments on the global stage), then these companies are burdened by rising debt.

Several listed companies said they are ready to cope with a weaker rupiah. For example Indonesian pharmaceutical company Kalbe Farma (local pharmaceutical companies are known for importing the bulk of materials from abroad as Indonesia lacks these raw materials). Kalbe Farma President Director Vidjongtius said the company is aiming for enhanced production efficiency as well as the launch of new products. However, it has not implemented a formal hedging policy. Therefore, Kalbe Farma plans to buy enough foreign currency for its import needs. He added the company will intensively follow the performance of the rupiah in order to be on time when purchasing foreign currencies.

Another example, telecommunication network provider Indosat Ooredoo, also has its own strategy to cope with a weaker rupiah. Through foreign-exchange forward swaps it hedged around 51 percent of its US dollar exposure.

Indonesian Rupiah vs US Dollar (JISDOR):

| Source: Bank Indonesia