After opening on Monday (28/09) Indonesian stocks rapidly fell amid mixed Asian markets. The main factor that causes several Asian markets to fall is declining Chinese industrial profits (triggering concern about a deepening slowdown of the world’s second-largest economy). China’s industrial profits fell 8.8 percent in August, down from July’s 2.9 percent drop. By 09:50 am local Jakarta time, the benchmark Jakarta Composite Index was down 1.41 percent to 4,150.27 points.

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The central bank of Indonesia (Bank Indonesia) is set to announce the second installment of a policy package that aims at raising onshore US dollar supplies (and liquidity). As the rupiah has been the second worst-performing Asian emerging market currency (after Malaysia’s ringgit), having depreciated 18.1 percent against the US dollar so far in 2015, Indonesian policymakers are anxious to prop up the ailing currency in order to safeguard the country’s financial stability. Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) stood at IDR 14,690 per US dollar on Friday (25/09), a 17-year low.

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Stock markets in Asia were mixed on Friday (25/09) after Federal Reserve Chairwoman Janet Yellen said in a speech at the University of Massachusetts that the US central bank is still on track to raise interest rates before the year-end (provided no economic shocks take place as the move is data-dependent). After this looming hike, Yellen suggests to gradually tighten US monetary policy thereafter.

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In line with other Asian emerging markets and currencies, Indonesian stocks and the rupiah are weakening on Friday (25/09) after Federal Reserve Chairwoman Janet Yellen said during her speech at the University of Massachusetts that US interest rates are likely to be raised before the year-end, provided no economic shocks occur. Yellen stated that most FOMC participants agree on a Fed Fund Rate hike later this year, followed by gradual further monetary tightening thereafter.

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Global markets declined for a fifth straight day on Thursday (24/09) on persistent negative sentiments related to sluggish global economic growth, the Volkswagen emission scandal and the continuation of uncertainty about the timing of higher US interest rates after the Federal Reserve kept rates unchanged at its September policy meeting. Japan’s Nikkei 225 Index fell 2.76 percent today, while European and US stocks are deep in the red. Indonesian markets were closed due to Idul Adha celebrations (the Muslim day of sacrifice) and will therefore respond to these developments on Friday (25/09).

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Apart from external factors (China’s weak manufacturing activity and persistent uncertainty about the timing of higher US interest rates) that plague Indonesian assets today, there are also domestic factors that push Indonesian stocks and the rupiah into the red. These domestic factors include Indonesia’s downgraded economic growth forecasts and the central bank’s downgraded rupiah outlook. Meanwhile, Indonesia’s foreign exchange reserves - used to defend the rupiah - have declined further.

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In line with other Asian markets, Indonesian stocks and the rupiah are weakening heavily on Wednesday (23/09). Based on the Bloomberg Dollar Index, Indonesia’s rupiah had depreciated 0.71 percent to IDR 14,655 per US dollar by 11:08 am local Jakarta time, while the benchmark Jakarta Composite Index had fallen 1.56 percent to 4,276.43 points by the same time, with the financial sector in particular taking a hit. There are several causes that explain this weak performance today.

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Today (22/09), the Indonesian rupiah extended its weak performance and has passed beyond the level of IDR 14,500 per US dollar. Most Asian currencies continue to fall against the greenback as uncertainty about the timing of higher US interest rates persists. Although the Federal Reserve decided to postpone a Fed Fund Rate hike at its September policy meeting, markets are still preparing for a hike before the year-end as many Federal Reserve objectives had been met.

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The central bank of Indonesia (Bank Indonesia) estimates that inflation will ease below seven percent year-on-year (y/y) in September 2015 on the back of lower prices of raw foods and lower administered prices (including fuel and electricity) in the post the Ramadan and Idul Fitri period. Bank Indonesia Governor Agus Martowardojo said the central bank expects inflation at around 6.95 percent (y/y) in September.

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Most Asian markets started weak in the new trading week on persistent uncertainty about the timing of higher US interest rates after the US Federal Reserve decided to postpone a Fed Fund Rate hike last week. This context raises investors’ appetite for safe haven assets. By 13:45 pm local Jakarta time on Monday (21/09), Indonesia’s rupiah had depreciated 0.66 percent to IDR 14,469 per US dollar according to the Bloomberg Dollar Index, while the benchmark Jakarta Composite Index was down 0.22 percent to 4,370.63 points.

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In recent years, Indonesia's car sales have shown robust growth, culminating in a record high number of 1.12 million sold car units in 2012. This is an important statistic because car sales inform us about the state of the economy. Generally, rising car sales indicate an expanding economy while declining car sales indicate that the economy is slowing down. When we take a look at the table below, there is a link visible between Indonesia's GDP growth and rising car sales, except for 2011 to 2012 when GDP growth declined while car sales rose.

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Although many global indices were up, Indonesia's benchmark stock index (IHSG) fell a total of 2.93 percent during last week's trading. One important issue on global indices is the tapering off of the Federal Reserve's quantitative easing (QE3). On 17 and 18 September, the next meeting of the FOMC is scheduled, which is expected to discuss the future of QE3. Notably, as the meeting comes closer, most global indices in fact rise. Thus, market players seem to have become less concerned about an end to QE3.

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Contrary to Thursday's trading day (05/09) when the benchmark stock index of Indonesia (IHSG) opened strong but ended in the red, on Friday (06/09) it was the other way round. The IHSG started negative but ended the day 0.53 percent up to 4,072.35 points. Factors that made a negative impact on the IHSG were the continueing fall of the rupiah as well as speculation that Indonesia's foreign exchange reserves would decline again at end-August. However, a number of rising Asian indices influenced the IHSG in a positive way.

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Indonesia's main stock index (IHSG) started rather well on Thursday's trading day (05/09) despite the fact that most analysts expected a weakening index. Positive market sentiments were triggered by rising Asian stock indices (brought on by yesterday's rising indices on Wall Street). However, as the rupiah continued its downward spiral, market players began to exit the market, thus resulting in the 0.55 percent fall of the IHSG to 4,050.86. Foreign investors were net sellers of Indonesian assets, while domestic players recorded a net purchase.

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Indonesia's benchmark stock index (IHSG) could not continue its rebound on Wednesday (04/09). Amid mostly falling Asian markets, the IHSG fell 2.17 percent to 4,073.46 points. Asia was on a four-day winning streak but after president Obama received support from the Republican speaker of the House of Representatives, John Boehner, regarding military actions in Syria, global investors shied away from riskier assets. Indonesia and India are currently viewed as weak investment targets due to the countries' current account deficits.

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According to global credit rating and research agency Fitch Ratings, Indonesia's major banks are robust against the rupiah currency slide due to their low unhedged foreign currency exposure, strong loss-absorption cushions and - in some cases - foreign ownership. The slowdown in the economy will weigh on these (rated) banks' operating environment, but is unlikely to damage their credit profiles to any great extent. Below we provide Fitch Ratings' report. This report can also be accessed on their website.

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Indonesia's benchmark stock index (IHSG) rebounded on Tuesday (03/09) amid rising Asian stock indices inflicted by optimism about economic recovery in China and the USA. The IHSG rose 1.53 percent to 4,164.12 points. Agribusiness and mining stocks were the top performers today, while the miscellaneous industry, which fell 0.09 percent, was the only sectoral index on the Indonesia Stock Exchange (IDX) that was down. The rupiah depreciated against the US dollar as investors are concerned about July's USD $2.3 billion current account deficit.

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Indonesia's benchmark stock index (IHSG) went down 2.23 percent on Monday (02/09) after Statistics Indonesia (BPS) released a number of macroeconomic data. The country's inflation pace increased to 8.79 percent year-on-year, while it posted a record monthly trade deficit in July 2013 (USD $2.31 billion). Investors have been highly concerned about the development of Indonesia's current account deficit and after it became known that the figure was high in July, the IHSG quickly lost value.

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Last week Friday (30/08), Indonesia's benchmark stock index (IHSG) ended 2.23 percent up to the level of 4,195.09 points, continuing its three-day 'winning streak'. Underlying reasons being the central bank's new policy package (that was released as a response towards the negative impact of global turmoil on Indonesia's financial stability) and the higher benchmark interest rate (BI rate). The BI rate was raised 50 basis points on Thursday (29/08) to 7.0 percent to stabilize the weakening rupiah that fell to IDR 11,000 per US dollar.

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The decision of Indonesia's central bank (Bank Indonesia) to raise its benchmark interest rate by 50 basis points to 7.00 percent and its deposit facility (Fasbi) by 0.50 percent to 5.25 percent seem to have had a good impact on the value of Indonesia's stocks and the rupiah. Indonesia's benchmark stock index (IHSG) rose 2.23 percent to 4,195.09 points on Friday (30/08), implying a three-day winning streak. Since the first trading day of this year, the IHSG is down 3.47 percent.

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