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The benchmark Jakarta Composite Index rose 0.13 percent to 5,360.77 points on Friday (03/02), while the Indonesian rupiah appreciated 0.06 percent to IDR 13,343 per US dollar (Bloomberg Dollar Index). This slight growth was in line with the performance of most global stock markets on Friday after Wall Street ended little changed on the preceding trading day.
The Indonesian rupiah is appreciating sharply on Thursday (05/01) as the US dollar retreats from its (near) 14-year peak against a basket of major global currencies ahead of the release of the US Federal Reserve's December policy meeting minutes. Based on the Bloomberg Dollar Index, the rupiah had strengthened 0.83 percent to IDR 13,328 per US dollar by 14:00 pm local Jakarta time on Thursday (05/01). Particularly the unexpected fall of the US dollar against China's yuan spooks market players.
When on Friday afternoon (30 December 2016) the Indonesia Stock Exchange (IDX) closed its doors it effectively brought the year 2016 to an end in terms of stock trading on the local bourse. On Friday Indonesia's benchmark Jakarta Composite Index fell 0.11 percent to 5,296.71 points after two days of impressive gains. However, when looking at full-year 2016 the Jakarta Composite Index climbed 15.32 percent, hence being the second-best performing (national) benchmark stock index (after Thailand) in the Southeast Asian region in 2016.
On the last trading day before the Christmas break, Indonesia's benchmark Jakarta Composite Index fell for the ninth straight day, the longest losing streak since August 2005. On Friday (23/12) the index fell 0.30 percent to 5,027.70 points. The performance of Indonesian stocks was in line with other markets in Asia. Ahead of Christmas and New Year festivities, trade volume is low as investors are taking a break. Meanwhile, there are no positive sentiments stemming from the Indonesian market.
As we approach the year-end, and without the presence of positive triggers, investors seem to engage in profit-taking. Therefore, Indonesia's benchmark Jakarta Composite Index now extended its losing streak to seven straight sessions. Indonesian stocks fell 0.99 percent to 5,111.39 points on Wednesday (21/12), a decline led by consumer staples and financial shares, while the Indonesian rupiah depreciated 0.16 percent to IDR 13,459 per US dollar (Bloomberg Dollar Index). The Federal Reserve's recent rate hike still seems to overshadow global investor sentiment.
The Federal Reserve decided - in line with expectations - to raise its benchmark Fed Funds Rate by 0.25 percent to the range of 0.50 - 0.75 percent, exactly one year after its first rate hike (in a decade). Furthermore, the Fed Chair Janet Yellen also indicated it sees three more interest rate hikes in 2017. This is a bit more hawkish than markets expected. Tighter monetary policy in the USA is required as the US labor market and growth in household spending improves. Inflation has also improved but remains below the Fed's 2 percent (y/y) target. Business investment, however, remains soft.
The central bank of Indonesia (Bank Indonesia) announced that the country's foreign exchange reserves fell to USD $111.5 billion at the end of November 2016, from USD $115.0 billion in the preceding month. The USD $3.5 billion decline was caused by Bank Indonesia's efforts to stabilize the rupiah exchange rate as well as the government's external debt repayments. Despite the decline, Bank Indonesia regards the current level of forex reserves as healthy.
The Indonesian rupiah has been appreciated significantly over the past two days versus the US dollar. By 12:00 noon local Jakarta time on Wednesday (07/12), Indonesia's currency had strengthened 0.29 percent to IDR 13,331 per US dollar (based on the Bloomberg Dollar Index). Meanwhile, Bank Indonesia's Jakarta Interbank Spot Dollar Rate (JISDOR) appreciated 0.51 percent to IDR 13,336 per US dollar today. Lets zoom in on this performance.
Contrary to most other Asian stock indices, Indonesia's benchmark Jakarta Composite Index opened in the green zone on Monday morning (05/12). While, most markets are plagued by the outcome of Italy's referendum on Sunday (and Italian Prime Minister Matteo Renzi announcing his resignation), Indonesian stocks still seem to continue with the relief rally after the peaceful anti-Ahok demonstration on Friday (02/12). However, rupiah weakness, particularly as the US Federal Reserve may raise rates can limit the rise of local stocks.
While most Asian stock indices were in the red zone on Friday (02/12), Indonesian stocks bucked the trend. Indonesia's benchmark Jakarta Composite Index rose 0.91 percent to 5,245.96 points, while the Indonesian rupiah appreciated 0.39 percent to IDR 13,512 per US dollar (Bloomberg Dollar Index). While global investors were cautious ahead of the new US payroll data (to be released later on Friday), domestic investors poured money into Indonesian stocks. What explains this performance today?
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The Indonesian rupiah exchange rate depreciated slightly on Thursday (03/07). The US dollar gained as markets reacted to Wednesday’s ADP nonfarm payrolls report which showed that 281,000 jobs were added in the US private sector in June 2014, thus exceeding expectations. Furthermore, the market is optimistic that US employment data, released later today, will be positive too. According to the Bloomberg Dollar Index, the currency of Indonesia depreciated 0.04 percent to IDR 11,918 per US dollar.
Although the benchmark stock index of Indonesia (known as Jakarta Composite Index or IHSG) was in the red zone prior to the release of Indonesia’s June inflation figure and May trade data, at the end of the day it finished slightly in the green zone. The IHSG climbed 0.13 percent to 4,884.83 points. The macroeconomic data that were released were positive and made market participants engage in stock trading. Moreover, the index was supported by Asian stock markets that were mostly up as well as the appreciating rupiah exchange rate.
Despite Hong Kong’s falling Hang Seng Index (HSI), the benchmark stock index of Indonesia (known as the Jakarta Composite Index or IHSG) managed to climb 0.69 percent to 4,878.58 points on Monday (30/06). A number of reasons can be cited that positively influenced the performance of the IHSG. These are higher US Michigan Consumer Sentiment, positive forecasts for tomorrow’s release of June inflation and the May trade balance of Indonesia, declining global oil prices and the appreciating Indonesian rupiah exchange rate.
The Indonesian rupiah exchange rate is appreciating sharply on Monday (30/06). By 15:13pm local Jakarta time, the currency of Indonesia had strengthened 1.31 percent to IDR 11,838 against the US dollar. Main factors that cause this performance are the weakening US dollar (as a slowdown in the US economic recovery evokes expectations that the Fed Rate will not be raised soon) and falling oil prices; the US benchmark West Texas Intermediate declined 30 cents to USD $105.44 in mid-morning trade while Brent crude fell 22 cents to USD $113.08.
Although the Indonesian rupiah exchange rate appreciated 0.86 percent to IDR 11,995 per US dollar on Friday (27/06) as economic data from China, South Korea and Taiwan sparked optimism that regional growth has picked up, the recent depreciating trend of Indonesia’s currency burdens the country’s manufacturing industry. This industry is still dependent on imports of raw materials, capital goods and auxiliary materials, which are paid using US dollars causing the domestic industry to feel the financial impact of a weaker rupiah.
The Indonesian rupiah exchange rate depreciated considerably on Wednesday (25/06) after Indonesia’s central bank (Bank Indonesia) said it would allow rupiah depreciation in an attempt to boost competitiveness of the country’s exports, while curbing imports. This strategy will have a positive impact on the country’s troubled trade balance. Based on the Bloomberg Dollar Index, the currency had weakened 0.67 percent to IDR 12,070 per US dollar by 14:30pm local Jakarta time.
The performance of Indonesia’s benchmark stock index (known as Jakarta Composite Index or IHSG) was similar to the performance at the start of last week, possibly influenced by the presidential debates that took place a day prior to the past two Mondays. These debates, between the two presidential candidates (Joko Widodo and Prabowo Subianto), are broadcast live on national television and are important to outline each candidate’s vision and mission to the people. On 9 July 2014, Indonesians will vote for a new leader.
The Indonesian rupiah exchange rate depreciated 0.62 percent to IDR 11,893 per US dollar on Tuesday (17/06), a four-month low. The main reason behind this poor performance is increased concern about the impact of violence in northern Iraq - namely higher global oil prices - on Indonesia’s trade and budget deficits as Indonesia subsidises a significant amount of domestic fuels). As oil and gas imports accounted for about 23 percent of total imports of Indonesia in April 2014.
In the past week, the global crude oil price has increased considerably due to geopolitical tensions in Iraq which can disturb oil supplies from the Middle East. Up to the end of 2014, provided that no exceptional developments occur, the oil price is expected to range between USD $105-110 per barrel. Meanwhile, the Indonesian government announced that, despite the higher oil price putting pressure on the government’s budget balance, it will not increase prices of subsidized fuels this year.
ICRA Indonesia, an independent credit rating agency and subsidiary of ICRA Ltd. (associate of Moody's Investors Service), publishes a monthly newsletter which provides an update on the financial and economic developments in Indonesia of the last month. In the May 2014 edition, a number of important topics that are monitored include Indonesia's inflation rate, the trade balance, the BI rate, the IDR rupiah exchange rate, and gross domestic product (GDP) growth. Below is an excerpt of the newsletter:
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