Most Asian stock markets are strengthening on Friday after indices on Wall Street rose yesterday on strong US economic growth. The US economy grew 3.7 percent (y/y) in the second quarter of 2015 (much higher than the 2.3 percent estimated previously). As a result, the Dow Jones Industrial Average surged 2.27 percent while global oil prices rebounded over 10 percent on Thursday (27/08).
However, strong US GDP growth data could make the Federal Reserve decide to raise its key Fed Fund Rate sooner than later, particularly if recent volatility in global markets - caused by turmoil in China - will cease. As such, pressures on the rupiah persist. According to the Bloomberg Dollar Index, the rupiah had depreciated 0.25 percent to IDR 14,025 per US dollar by 10:05 am local Jakarta time. However, on Wednesday (26/08), President of the New York branch of the Federal Reserve William Dudley had stated that a US interest rate hike in September looks “less compelling” due to severe market volatility and turmoil in China.
Markets also speculate that Japanese policymakers will introduce more stimulus as the country’s inflation rate fell back to zero percent while household spending declined again. This resulted in a weaker yen.
The Jakarta Composite Index may also be supported by several actions conducted by the Indonesian government and Indonesia Stock Exchange. These actions involve the allowance of share buybacks by listed state-controlled companies (without needing shareholder approval) and the new daily limit on share losses (revised to a maximum daily loss of ten percent). The government also announced it will implement a policy package, aimed at supporting the rupiah, soon. Yesterday, Indonesian Economics Minister Darmin Nasution announced the package will become effective next week and includes deregulation and tax holidays. However, more detailed information has not been announced yet.
Previously, the Jakarta Composite Index had moved in bearish territory as it lost over 20 percent from its record high in April 2015 on global concern about China's economic slowdown and yuan devaluation.
Meanwhile, the Indonesia Stock Exchange (IDX) stated on Thursday (27/08) that it will most likely miss this year’s target of welcoming 32 new listings on the IDX. Amid weak market sentiments only nine companies have conducted an initial public offering on the IDX so far in 2015. Last year, a total of 24 companies conducted an IPO on the IDX (also falling below the target).
By 10:29 am local Jakarta time, the benchmark Jakarta Composite Index had climbed 1.73 percent to 4,507.31 points.