10 October 2025 (closed)
Jakarta Composite Index (8,257.86) +6.92 +0.08%
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In line with other Asian emerging assets, Indonesian stocks and the rupiah strengthened on Friday (23/10). The positive performance is mainly on the back of more stimulus measures by key central banks. Yesterday (22/10), Mario Draghi, Head of the European Central Bank (ECB), said the ECB may increase stimulus measures at the December policy meeting to raise inflation and boost the economy of the Eurozone.
The Indonesia Investment Coordinating Board (BKPM) announced on Thursday (22/10) that foreign direct investment (FDI) into Indonesia climbed 18.1 percent (year-on-year) to IDR 92.5 trillion (approx. USD $6.85 billion) in the third quarter of 2015 from the same quarter a year earlier. The Q3-2015 18.1 percentage point growth was almost the same as the 18.1 percent (y/y) increase in FDI posted in the previous quarter. FDI data from the BKPM does not include investment in the country's banking and oil & gas sectors.
With the exception of Japan, the majority of stock markets in Asia were under pressure on Wednesday (21/10) on concern about China's economic growth as Japan's exports to China fell 3.5 percent year-on-year in September. Today, it was announced that Japan posted a USD $95 billion trade deficit in September, worse than previously estimated, primarily on weakening exports due to slowing economic growth in China. However, Japanese stocks rose on stimulus hopes.
The Indonesian rupiah is not having a good day as it was down 1.05 percent to IDR 13,659 per US dollar by 10:45 am local Jakarta time (Bloomberg Dollar Index) on Tuesday (20/10), weakening the most in a week. In line with most other emerging market currencies in Asia, the rupiah is falling presumably on concern about weak economic growth in China. Yesterday, Chinese authorities announced the world's second-largest economy expanded 6.9 percent (y/y) in Q3-2015. This result is slightly better than estimates but does also constitute a six-year low, hence negatively affected exports of its trading partners.
Emerging market assets, including Indonesian stocks and the rupiah, are being supported today by the release of China's official third quarter gross domestic product (GDP) growth figure. The economy of China expanded 6.9 percent (y/y) in Q3-2015, slightly beating expectations (at 6.8 percent y/y) on relatively robust spending by Chinese consumers. Most emerging market assets strengthened after the news as a slightly better Chinese economy (implying higher Chinese demand) impacts positively on other countries in the Asian region on expectation of improving export performance.
Agus Martowardojo, Governor of the central bank of Indonesia (Bank Indonesia), said there are still 320 local companies that have not complied with the central banks' hedging requirements regarding foreign loans. A Bank Indonesia study conducted in late-2014 showed that the country’s private sector foreign debt is vulnerable to several risks i.e. currency risks, liquidity risks and overleverage risks due to unhedged loans.
As expected, the central bank of Indonesia (Bank Indonesia) left its benchmark interest rate (BI rate) unchanged at 7.50 percent at the October Board of Governor's meeting on Thursday (15/10). Meanwhile, Bank Indonesia maintained the deposit facility rate and the lending facility rate at 5.50 percent and 8.00 percent, respectively. Rates were left unchanged as the global economic outlook remains highly uncertain. This jeopardizes the stability of the Indonesian rupiah.
After Islamic New Year celebrations, Indonesia’s financial markets reopened on Thursday (15/10). The sharp appreciation of the Indonesian rupiah on Thursday morning is remarkable. By 10:10 am local Jakarta time, the rupiah had appreciated 2.36 percent to IDR 13,295 per US dollar (Bloomberg Dollar Index) hence extending last week’s gains when Indonesia’s currency strengthened around 9 percent against the greenback. Emerging markets assets are still gaining on signs that the Federal Reserve will not raise US interest rates in the short-term.
In a draft regulation, Indonesia's Financial Services Authority (OJK), the government agency that regulates and supervises the financial services sector, proposes that the country's leading banks have set aside more capital - between 1 and 3.5 percent of their risk-weighted assets (a "capital surcharge") by December 2015 - as a buffer against financial market volatility risks. The new policy aims to strengthen Indonesia's financial system amid the country's economic slowdown and severe external pressures (looming higher US interest rates and China's slowdown).
On Tuesday (13/10), Chinese authorities announced that the country's trade balance widened to 376.2 billion yuan in September 2015, beating forecasts. China's exports contracted less than expected at -1.1 percent. However, China's imports (-17.7 percent) plunged more than expected and now recorded the eleventh month of straight declines. Although the balance is better than had been forecast, China's latest import and export data show again that the world's second-largest economy is plagued by a persistent slowdown.
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There are doubts whether Indonesia's gross domestic product (GDP) growth can reach 5.2 percent year-on-year (y/y) in full-year 2018 as Indonesia is experiencing a couple of major challenges. Challenges include the global trade war, the fragile rupiah, Bank Indonesia's higher benchmark interest rate, the current account deficit, and political tensions ahead of the 2019 legislative and presidential elections. Currently, Indonesia Investments' forecast for Indonesia's economic growth is set at 5.2 percent (y/y) in 2018.
Chief executive officers (CEOs) in Indonesia have become slightly less optimistic about the Indonesian economy and politics. This makes sense considering the presence of simmering global trade tensions, sharp rupiah depreciation against the US dollar, and Bank Indonesia's recent series of interest rate hikes.
One of the national industries that is heavily affected by the weak rupiah exchange rate is Indonesia's pharmaceutical industry. Considering around 90 percent of raw materials in the pharmaceutical industry need to be imported from abroad (in US dollars), production costs rise sharply in times of significant rupiah depreciation. It is estimated that materials imported from abroad account for about 75 percent of pharmaceutical companies' total production costs.
In an ad hoc press conference on Thursday (26/04) Bank Indonesia Governor Agus Martowardojo provided an update on the performance of the Indonesian rupiah as well as an update on the strategies that are - or can be - used by the central bank to safeguard a stable rupiah. When the ad hoc press conference was announced we initially expected to see an interest rate hike. However, based on a statement from Bank Indonesia, this seems to be the last option the central bank wants to use.
Indonesia's benchmark Jakarta Composite Index fell 1.24 percent to 6,229.63 points on Tuesday (24/04). The performance of Indonesian stocks were in line with the general trend in Southeast Asia. Due to rising US treasury yields (touching nearly 3 percent, its highest level since January 2014) investors withdraw their funds from riskier assets in emerging markets. Concerns over US inflation and the fiscal deficit are behind the rising US treasury yield.
The central bank of Indonesia (Bank Indonesia) said the country's current account deficit remained under control, albeit widening in the last quarter of 2017. Indonesia's current account deficit reached USD $5.8 billion or 2.2 percent of gross domestic product (GDP) in Q4-2017 (up from a deficit of USD $4.6 billion or 1.7 percent of GDP in the preceding quarter).
Although the Indonesian rupiah has been strengthening against the US dollar since mid-December 2017, the rupiah may encounter serious pressures in the year 2018 amid US tax reforms, the US Federal Reserve's further monetary tightening, and unstable geopolitics. Meanwhile, Indonesian exports are expected to grow, but only in the range of 5-6 percent year-on-year (unlike 2017 when the nation's exports rebounded 17 percent).
Earlier this week, the central banks of Indonesia (Bank Indonesia), Malaysia (Bank Negara Malaysia), Thailand (Bank of Thailand) jointly announced the launch of the local currency settlement framework. This framework aims at boosting the use of local currencies in transactions (specifically related to trade and investment) conducted between Indonesia, Malaysia and Thailand in an effort to reduce these countries' dependence on the US dollar.
The Bank Indonesia (BI) Board of Governors agreed to hold the BI 7-day Reverse Repo Rate at 4.25 percent, while maintaining the deposit facility and lending facility rates at 3.50 percent and 5.00 percent, respectively, effective per 20 October 2017. The decision was in line with efforts to maintain macroeconomic and financial system stability, while stimulating the domestic economic recovery.
After concluding its monthly two-day policy meeting on Thursday (20/07) the central bank of Indonesia (Bank Indonesia) decided to leave its interest rate environment unchanged. The BI 7-day (Reverse) Repo Rate (BI-7 day RR Rate) was kept at 4.75 percent, while the deposit facility and lending facility rates were kept at 4.00 percent and 5.50 percent, respectively.
