10 October 2025 (closed)
Jakarta Composite Index (8,257.86) +6.92 +0.08%
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Despite the interest rate hike, pressures on the Indonesian assets remained high on Friday (18/05) as the US dollar and US bond yields hold firm near their recent highs. By the end of the trading day the Indonesian rupiah had depreciated 0.70 percent to IDR 14,156 per US dollar (Bloomberg Dollar Index), touching lows we have not seen since late 2015.
In line with our expectation, the central bank of Indonesia (Bank Indonesia) raised its benchmark interest rate (BI 7-Day Reverse Repo Rate) by 25 basis points (bps) to 4.50 percent at the monetary policy meeting in May 2018 that was concluded today (17/05). Agus Martowardojo, Governor of Bank Indonesia, added that the deposit facility and lending facility were raised to 3.75 percent and 5.25 percent, respectively.
Indonesian assets remain under pressure as the US 10-year treasury yield rose to 3.095 percent, touching a near seven-year peak. As a result the US dollar is at a five-month high. While the US dollar rally stalled last week after the release of weaker-than-expected US inflation (April data), the greenback's performance was lifted this week on the back of strong US consumer spending figures. It is having a big impact in Asia.
The Indonesian rupiah and benchmark Jakarta Composite Index are again under pressure on Tuesday (15/05) as the 10-year US treasury yield is again touching 3 percent, while tensions in the Middle East increase and uncertainty about US-China trade relations persist ahead of a meeting between US and Chinese officials in Washington later this week where trade talks resume. Meanwhile, crude oil prices recovered to around USD $71 per barrel, approaching a 3.5 years high, on the back of reduced supply as OPEC reported that the global oil glut has been virtually eliminated.
There is a big possibility that the central bank of Indonesia (Bank Indonesia) will raise its benchmark interest rate (the 7-day Reverse Repo Rate) at the monthly policy meeting in May (scheduled for 16-17 May 2018). Bank Indonesia Governor Agus Martowardojo confirmed that Bank Indonesia is currently preparing "strict and consistent monetary policy measures, including the adjustment of the benchmark rate, as the central bank gives priority to market confidence and macroeconomic stability".
The central bank of Indonesia (Bank Indonesia) announced that the nation's foreign exchange reserves stood at USD $124.9 billion at the end of April 2018, down from USD $126.0 billion one month earlier. This decline is in line with expectations as the central bank had already confirmed it is intervening in the market to defend the Indonesian rupiah amid broad-based US dollar strength.
Indonesian stocks, the rupiah and bonds are all under heavy pressure on Tuesday (08/05). Indonesia's benchmark Jakarta Composite Index plunged 2.12 percent to 5,760.35 points in the first trading session of the day. This performance is in stark contrast to most Asian stocks that are trading in green territory today. Meanwhile, the Indonesian rupiah has slipped above the IDR 14,000 per US dollar level. Lets take a look why.
Indonesia again led losses among Asian stock markets on Friday (04/05). The benchmark Jakarta Composite Index fell 1.13 percent to close at 5,792.35 points, its lowest position since August 2017. Most stocks in the Asia-Pacific region were in the red zone today as investors lack risk appetite ahead of the release of US payrolls data (due later today). Analysts expect to see a strong figure. Meanwhile, US unemployment is also expected to have eased slightly.
In line with expectations the US Federal Reserve left its benchmark interest rate unchanged in the range of 1.50 - 1.75 percent at the two-day May policy meeting (1-2 May 2018). The US central bank also said it expects the recent rise in inflation (approaching the Fed's target) to be sustained, thus markets are increasingly expecting an interest rate hike at the next policy meeting (scheduled for 12-13 June).
Indonesia Investments expects to see Bank Indonesia raising its benchmark interest rate at least once in 2018 in order to relieve pressures on the Indonesian rupiah. Rising expectations that the US Federal Reserve will implement four interest rate hikes in 2018, while the 10-year US treasury yield passed beyond the 3 percent line, have resulted in major pressures on emerging market assets, including Indonesia's rupiah and stocks.
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Indonesia’s inflation rate in July 2013 was significantly higher than analysts had previously estimated. The country’s July inflation figure accelerated to 3.29 percent. On year-on-year basis, it now stands at 8.61 percent, the highest inflation rate since many years. Particularly food commodity and transportation prices rose steeply. The main reason for Indonesia's high inflation is the reduction in fuel subsidies. In late June, the government increased the prices of subsidized fuels in order to relieve the ballooning budget deficit.
As I stated before, mixed sentiments continue to influence the performance of Indonesia's main stock index (IHSG). During Thursday's trading day (01/08), the index moved sideways. News that the Federal Reserve intends to continue its bond-buying program made a good impact. However, this positive sentiment was offset by the release of Indonesia's high July inflation rate as well as the country's continued trade deficit. At the end of the day, the IHSG managed to post a gain as it received support from rising stock indices in Asia.
Despite being up at the start of the trading day, Indonesia's main stock index (IHSG) was under pressure for the remainder of Wednesday (31/07) due to investors' appetite for profit taking. Indonesian company reports (Semester I-2013) were mixed and, in combination with other mixed Asian indices, it made many investors wait and see for the meeting of the Federal Reserve first. Asian indices suffered because of Malaysia's and India's downgrade by Fitch Ratings. This triggered speculation whether Indonesia's outlook will be cut as well.
Last week (22-26 July 2013), Indonesia's main stock index (IHSG) ended 1.39 percent down at 4,658.87. The daily value of transactions on the regular market narrowed to an average of IDR 3 trillion (USD $300 million) from IDR 3.84 trillion in the previous week. Foreigners still recorded net sales amounting to IDR 92.9 billion (USD $9.3 million). Lack of positive sentiments, financial results of companies that were below expectation and the continued weakening of the rupiah against the US dollar resulted in the decline of the index.
Indonesia's main stock index (IHSG) continued its weakening trend this week. The index fell 0.93 percent to 4,674.12 on Thursday (25/07). This downward movement today was in line with most other Asian stock indices. All sectoral indices of the IHSG weakened, except for the miscellaneous industry. Indonesian blue chips, in particular, were under pressure. Unilever Indonesia fell 3.38 percent and Bank Mandiri lost 3.37 percent. Trade was relatively quiet with value of transactions at IDR 4.5 trillion (USD $441.2 million).
Indonesia's main stock index (IHSG) was not able to continue yesterday's rise as investors, particularly domestic investors, engaged in profit taking. Foreign investors, who were net buyers of Indonesian assets, were not able to guide the IHSG to positive territory. Mixed Asian stock indices, responding to weak Chinese data, did not support Indonesia's index. Moreover, market participants expect that the rupiah will continue its weakening trend and have begun speculating whether the benchmark interest rate (BI rate) will be raised again.
Yesterday's rising indices on Wall Street, high expectations of companies' financial reports and positive statements regarding economic growth in China resulted in a good day at the Indonesia Stock Exchange (IDX). Indonesia's main stock index, the IHSG, rose 1.88 percent to 4,767.16 on Tuesday (23/07), even though technical indicators seemed to predict a weakening of the index. Also the continued fall of the Indonesian rupiah did not turn investors away from the market. In fact, foreign investors were net buyers of Indonesian stocks.
As I wrote before, profit taking in combination with mixed movements of global stock indices resulted in the limited movement of Indonesia's main stock index (IHSG) on Monday (22/07). The IHSG was corrected 0.96 percent to 4,678.98. All of the sectoral indices weakened, except for the plantation and mining sectors. As there were no positive news publications that would make investors buy assets, they decided to engage in profit taking after the IHSG had risen for five consecutive days.
The Indonesian rupiah (IDR) is experiencing one of its worst losing streaks in a decade. On Friday (19/07), the currency weakened to IDR 10,070 against the US dollar, which implies a devaluation of 4.14% in 2013 so far. The central bank of Indonesia, Bank Indonesia, does all it can to support the currency: the country's lender of last resort supplies dollars to the market triggering the reduction of foreign reserves from USD $105 million at end-May to $98 million at end-June, and raised its benchmark interest rate (BI Rate) by 50 bps to 6.50%.
Indonesia's main stock index (IHSG) went up 0.89 percent to 4,720.44 on Thursday (18/07). The index was supported by developments in the United States. On Wednesday (17/07), Ben Bernanke spoke to the US Congress and said that the Federal Reserve is likely to continue its bond-buying program in 2013 and may gradually withdraw the quantitative easing program in 2014. But only if economic recovery of the US provides the good context. This message supported the IHSG although foreign investors continued to record a net sale.
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