Indonesian stocks climbed to a 14-month high, supported by strong risk appetite, reflected by solid capital inflows from abroad. Indonesia's Jakarta Composite Index has now extended its rally to a fourth straight day. This rally is supported by optimistic expectations that the nation's tax amnesty program will become a success, the nation's substantially growing foreign exchange assets in June, a positive trade balance, and the stable rupiah rate. These are all signs that the Indonesian economy is stable and ready for higher growth.

Read more: Update Tax Amnesty Program Indonesia: First Days after Launch

Moreover, many analysts expect to see another interest rate cut. On Thursday (21/07) Bank Indonesia will complete its July policy meeting. Given the Brexit issue has not impacted significantly (at least not in a negative way) on Indonesia's financial markets, while the Fed Funds Rate hike still seems off the table, the central bank of Indonesia has room for monetary easing. So far this year, Bank Indonesia already cut its BI rate gradually from 7.50 percent at the year-start to 6.50 percent as inflation and the current account deficit have been under control, while the rupiah has appreciated around 5 percent against the US dollar since year-start.

However, Bank Indonesia's benchmark rupiah rate (the Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) depreciated 0.09 percent to IDR 13,100 per US dollar on Wednesday (20/07). This modest depreciation will not be perceived as a problem by Bank Indonesia as the central bank informed last week that it will not let the rupiah strengthen too much in order to maintain competitive exports.

Indonesian Rupiah versus US Dollar (JISDOR):

| Source: Bank Indonesia

Whether the rally of the Jakarta Composite Index continues or halts depends on various matters, such as Indonesian companies Q2-2016 corporate earnings reports, Q2-2016 GDP growth and more details about inflows generated by the tax amnesty program.

Overall Asian stocks were mixed on Wednesday. Overnight, stocks on Wall Street were mixed as well and therefore failed to give a clear direction for Asian markets. Mixed Q2-2016 earnings from Goldman Sachs, Johnson & Johnson and Netflix, and positive housing starts and building permits caused a mixed picture in the USA. Meanwhile falling oil prices overnight, followed by a modest gain on Wednesday also failed to give clear positive or negative sentiments.

Read more: IMF Cuts Global Growth Outlook on Brexit, Indonesia Affected?

Investors are also waiting for the results of the European Central Bank's policy meeting, to be conducted later this week.