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Indonesian Finance Minister Sri Mulyani Indrawati does not expect to see a change in Indonesia's current account deficit in the third quarter of 2018 as government efforts to curtail the deficit have only been started in September, while the July and August trade balances showed significant deficits.
Those who invest in Indonesian assets (or actually in any assets across the globe) will need to carefully monitor two matters this week. First, the upcoming Federal Reserve policy meeting (scheduled for 25-26 September 2018) that will most likely result in another interest rate hike. And secondly, the latest developments in USA-China (trade) relations.
On Friday 07 September 2018 Indonesia Investments released the August 2018 edition of its monthly research report. The report aims to inform the reader of the key political, economic and social developments that occurred in Indonesia in the month of August 2018 and also touches upon key international developments that impacted on the Indonesian economy.
Concerns about emerging market contagion is pushing emerging market stocks, currencies, and bonds in deep red territory on Wednesday (05/09). Indonesia leads the decline with its benchmark Jakarta Composite Index plunging slightly over 3 percent in the first one-and-half hours of trading, while the rupiah is sliding toward the IDR 15,000 per US dollar level (its weakest position since the Asian Financial Crisis in the late-1990s).
All eyes remain on the Indonesian rupiah today (04/09). Yesterday, the Indonesian currency depreciated 0.71 percent to IDR 14,815 per US dollar (Bloomberg Dollar Index), and considering external pressures remain high the rupiah is expected to continue its decline in the foreseeable future. Authorities' efforts are able to smoothen the rupiah's weakening trend, hence avoiding sudden big slumps that could trigger panic. But to reverse the current trend of the rupiah, there are no short-term solutions.
The Indonesian rupiah rate depreciated beyond the IDR 14,700 per US dollar level on Friday (31/08). Based on the Bloomberg Dollar Index the rupiah had weakened 0.20 percent to IDR 14,710 per US dollar by 11:00 am local Jakarta time. Indonesia's currency is now gradually approaching a two-decade low. The weakening rupiah also caused the country's benchmark Jakarta Composite Index to fall 1.19 percent on Friday's first trading session.
The Indonesian rupiah is under pressure again on Thursday (23/08) in line with the overall trend of emerging market currencies. Based on the Bloomberg Dollar Index, the rupiah had depreciated 0.38 percent to IDR 14,630 per US dollar by 11:00 am local Jakarta time on Thursday.
Most stocks in the Southeast Asian region were in green territory on Monday (20/08). So was Indonesia's benchmark Jakarta Composite Index. The index rose a whopping 1.87 percent to close at 5,892.19 points at the first trading day of the new week, pairing some of the losses it has suffered in recent weeks.
The central bank of Indonesia raised its benchmark interest rate (the seven-day reverse repo rate) by 25 basis points (bps) to 5.50 percent at the August 2018 policy meeting. The decision was in line with our expectations as heavy pressures have been affecting the rupiah after the collapse of the Turkish lira.
Indonesian assets are under pressure on Monday (13/08). By 16:00 pm local Jakarta time, the Indonesian rupiah had depreciated 0.90 percent to IDR 14,608 per US dollar, while the benchmark Jakarta Composite Index had plunged 3.55 percent. Although all emerging markets in Asia are under pressure on Monday, Indonesia is seemingly the most fragile one.
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Various factors contributed to the 2.30 percent decline of the Jakarta Composite Index (IHSG) on Tuesday (26/11). The index in fact fell below its support level. What were the main reasons for this weak performance? Firstly, the Indonesian rupiah exchange rate has been depreciating severely and causes concerns among market players. Secondly, most Asian stock indices fell as valuations climbed high and the Japanese Yen strengthened. Thirdly, European stock openings on Tuesday were weak. All these reasons together led to foreign net selling.
The Jakarta Composite Index (Indonesia's benchmark stock index, abbreviated IHSG) made a positive start on Monday (25/11). Investors were confident amid today's rising indices throughout Asia, brought on by the record breaking Dow Jones Index on Wall Street at the end of last week. However, this market optimism failed to provide a significant boost to the IHSG as the Indonesian rupiah exchange rate continued its downward spiral. The IHSG was up 0.39 percent to 4,334.80 points at the end of Monday's trading day.
On the last day of the trading week (22/11), Indonesia's benchmark stock index (IHSG) fell 0.19 percent to 4,317.96 points thereby extending its losing streak to three days as investors remain concerned about the looming end - or at least winding down - of the Federal Reserve's monthly USD $85 billion bond buying program known as quantitative easing (QE3). Foreign investors recorded a net sell of IDR 38 billion (USD $3.3 million). The other indices in Asia were mixed. The Hang Seng and Nikkei were up but the Shanghai Composite was down.
On Thursday's trading day (21/11/13), the Jakarta Composite Index (Indonesia's benchmark stock index, or IHSG) fell 0.56 percent to 4,326.21 points as investors are concerned seeing the result of the latest Federal Open Market Committee (FOMC) meeting, which seems to indicate that the Federal Reserve's monthly USD $85 billion bond-buying program (quantitative easing) will be wound down within a couple of months. The IHSG was also negatively affected by the lower preliminary HSBC Manufacturing PMI of China.
The Federal Reserve, central banking system of the United States, expects that the current economic recovery of the USA is set to continue. In the minutes of the latest Federal Open Market Committee (FOMC) meeting, held at end-October 2013, it is mentioned that within the next few months the Federal Reserve can start winding down its monthly USD $85 billion stimulus program (known as quantitative easing). The next FOMC meeting, which will shed more light on the future of the bond-buying program, is scheduled for December 2013.
Amid falling Asian stock indices, Indonesia's benchmark stock index (IHSG) went down 1.08 percent to 4,350.79 points on Wednesday's trading day (20/11). As has become an usual pattern, after one or two days of gain, market participants immediately engage in profit taking the following day. Investors reacted to the OECD's downgrade of its outlook for global economic growth (triggered by slowing growth in emerging markets) and to Indonesia's central bank's higher interest rate (which impacts negatively on the country's economic growth).
The government of Indonesia will release two additional fiscal policy packages at the end of November or start of December that both aim to heal Indonesia's current account deficit. The two packages constitute follow ups of the policy package that was released in August 2013. Previously, deputy minister of Finance, Bambang Brodjonegoro, announced that an additional package would be released in October. However, it turned out that the government needed some more time to prepare the two additional packages.
Various factors contributed to the 1.34 percent rise of Indonesia's benchmark stock index (also known as the Jakarta Composite Index or the IHSG) on Monday (18/11) to 4,393.59 points. Firstly, the index was supported by other major Asian stock indices which all benefited from rising indices on Wall Street and in Europe at the end of last week. Secondly, the IHSG felt the positive impact from speculation that the government of China will reform its economy in order to spur economic growth.
On Thursday 14 November 2013, Agus Martowardojo, Governor of Indonesia's central bank (Bank Indonesia), delivered his end-of-the-year speech at the Annual Bankers’ Dinner. The meeting was attended by leaders from Indonesia's House of Representatives (DPR), economic ministers, leaders of the country's banking industry and business community, non-ministerial government agencies as well as a number of international institutions, thus representing a strategic forum in terms of the national economy.
Indonesia's benchmark stock index (IHSG) was not able to continue its rebound. On Friday (15/11), the IHSG fell 0.73 percent to 4,335.45 points amid widespread profit taking. Foreign investors recorded net selling of IDR 193 billion (USD $16.9 million) on today's trading day. Moreover, investors are concerned about the impact of the higher interest rate of the central bank (7.50 percent), particularly on the property and banking sectors in the fourth quarter of 2013.
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