Asian markets are touching around nine-month lows on Thursday morning (28/06), tracking the performance of US stocks on Wall Street overnight. Key issue on Wall Street was the US stance on Chinese investment in US tech companies. While at the beginning of the day investors started to believe that US President Donald Trump would seek a softer approach toward this issue, top economic adviser Larry Kudlow would later tell reporters that the US would not soften its stance on China. As such, uncertainty regarding the issue persists.

Moreover, markets generally feel that Trump's eagerness to win better trade deals for the US is disturbing global economic growth. This includes growth of the US economy itself. Some analysts argue that Trump's trade policies will accelerate a recession in the US economy as trade restrictions (at home and abroad) will impact on certain US industries.

Secondly, a jump in crude oil prices to 3.5-year highs (despite a strengthening US dollar) caused concern that non-energy sectors could be negatively-affected. The strengthening oil price is caused by declining US stockpiles, a production disruption in Canada, and uncertainty about Libyan exports and Iranian exports (as the US administration demands oil importers to stop importing crude from Iran). Together, these issues give rise to supply worries, hence pushing up the oil price.

Also interesting to note is that copper, regarded a barometer of global economic strength because of its wide industrial use, touched a three-month low.

In the first trading session on Thursday (28/06) the benchmark Jakarta Composite Index fell 1.64 percent to 5,692.87 points, the lowest position since June 2017. However, stocks slightly pared losses ahead of the lunch break. Earlier in the morning the Jakarta Composite Index was down more than 2 percent.

Markets may also be concerned about Indonesia's Q2-2018 GDP growth. While Finance Minister Sri Mulyani Indrawati earlier stated that she expects Indonesia's GDP growth at around 5.2 percent (y/y) in Q2-2018 (an assumption that was supported by rapidly rising tax revenue collection), Coordinating Minister of Economic Affairs Darmin Nasution stated that he does not expect growth to touch 5.2 percent (y/y) in Q2-2018.

Another issue that could explain why Indonesian stocks are hit hardest on Thursday's trading day (among Asian markets) is that the quick count results of the local elections, held yesterday, indicate that incumbent President Joko Widodo (the market-favorite) will have to face a tough battle in the 2019 presidential election.

Meanwhile, the Indonesian rupiah depreciated 0.76 percent to IDR 14,271 (Bank Indonesia's JISDOR rate) on Thursday (28/06) and this seems to pave the way for another benchmark interest rate in Southeast Asia's largest economy. In May 2018 Bank Indonesia had already hiked its benchmark seven-day reverse repo rate by a total of 50 basis points (bps) in order to reduce external pressures on the rupiah. However, external pressures remain high amid speculation about a total of four Federal Reserve rate hikes this year as well as ongoing concerns over the global trade war.

At the monthly policy meeting of June (which is underway at the moment and will be concluded on Friday) we expect to see another 25 bps rate increase (to 5.00 percent).

Indonesian Rupiah versus US Dollar (JISDOR):

| Source: Bank Indonesia