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At least 11 listed companies on the Indonesia Stock Exchange announced that they are ready to payout dividends to shareholders in the upcoming March-April dividend season. However, the traditional dividend season also implies rising pressures on the rupiah exchange rate as a significant number of shareholders are foreign investors.
Many Asian stocks are in deep red territory dragged down by a 3.49 percent decline of Japan's Nikkei 225 index in the morning of Friday (23/03). The Nikkei 225 is responding to plunging stocks on Wall Street overnight where the Dow Jones Industrial Average tumbled 2.9 percent, while both the S&P 500 index and Nasdaq Composite dropped 2.5 percent, each. All three benchmark US indexes suffered their biggest drops since 8 February 2018.
As was widely expected by markets, the Federal Reserve raised its key interest rate to the range of 1.50 - 1.75 percent, which is the highest level since 2008, at the March 2018 monthly policy meeting on Wednesday (21/03). The rate hike was already priced in as few expected a different decision, hence most Southeast Asian stock indexes are up on Thursday (22/03), including Indonesia's benchmark Jakarta Composite Index that rose 0.19 percent to 6,324.78 points in the first trading session.
Based on the Bloomberg Dollar Index the value of the Indonesian rupiah weakened 0.41 percent to IDR 13,816 per US dollar on Thursday (08/03), the currency's weakest position since January 2016, ahead of the release of US non-farm payrolls and US employment data due on Friday (09/03). These data are expected to be strong and therefore pave the way for another Fed Funds Rate hike in March 2018.
Indonesia's foreign exchange reserves fell from a record high of USD $131.98 billion at the end of January 2018 to USD $128.06 billion at the end of February 2018. In a statement released on its official website, the central bank of Indonesia (Bank Indonesia) attributed the decline in reserve assets is to the use of foreign exchange to repay government external debt as well as efforts to stabilize the Indonesian rupiah exchange rate.
Most Asian stocks are in the red zone on Wednesday (07/03) after it was reported that Gary Cohn is to resign as adviser to US President Donald Trump. Cohn, who is well-regarded in the business community and markets, opposes Trump's looming protectionist import tariffs (a 25 percent import tariff on steel and a 10 percent tariff on aluminum). Seeing Cohn lose the battle in the White House, markets have become more concerned about the possible outbreak of a global trade war.
The Indonesian rupiah has been under heavy pressure over the past month amid US dollar strength ahead of the March Federal Reserve policy meeting where market participants expect to see another interest rate hike. The rupiah weakened 2.92 percent from IDR 13,402 per US dollar on 1 February 2018 to IDR 13,793 on 1 March 2018. Not only the rupiah but basically currencies have been sliding against the US dollar that touched a six-week high earlier in the week.
Based on the Bloomberg Dollar Index the Indonesian rupiah depreciated 0.53 percent to IDR 13,751 per US dollar on Wednesday (28/02), the weakest level against the greenback in slightly over two years. The weakening of the rupiah is in line with the performance of most other currencies as the US dollar is at a three-week high after Federal Reserve Chairman Jerome Powell struck a hawkish tone in his first congressional testimony.
Indonesia's benchmark Composite Index touched a new record high on Monday (19/02) after surging 1.48 percent to finish at 6,689.29 points, particularly on the back of surging basic industry & chemicals and property shares. The performance of Indonesian stocks was in line with the overall performance of Asian stocks today. Japan's Nikkei 225 almost surged 2 percent. Benchmark indexes in Singapore, the Philippines, Malaysia and Vietnam also rose more than 1 percent today.
Over the past two weeks the Indonesian rupiah depreciated significantly, passing beyond the IDR 13,600 per US dollar level. Also on Monday (12/02) rupiah weakening continued albeit very limited. By 15:25 pm local Jakarta time the currency of Indonesia had weakened 0.05 percent to IDR 13,635 per US dollar (Bloomberg Dollar Index).
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Although most Asian stock indices went up on Wednesday (10 April 2013), the Indonesia Stock Exchange (IHSG) could not cling on to their movement. In fact, even the main index of South Korea, a country plagued by political tensions, reported a rise. The IHSG was not able to follow suit due to investors' profit taking. Foreign market participants recorded a net sell, particularly Indonesia's blue chip stocks, which caused the index to end at 4,877.48, a 0.45 percent fall.
In its most recent report, the Asian Development Bank (ADB) forecasts Indonesia to continue its robust economic growth. Last year, the economy of Indonesia expanded 6.23 percent, and according to the ADB this figure will rise to 6.4 percent in 2013 and 6.6 percent in 2014. However, since the start of April there have been some issues that are causing Indonesia's stock indices to go down. Although believed to be only temporary, it is worth taking a closer look.
On Monday, the Dow Jones Index gained as corporate results of Q1-2013 are estimated to be good. This subsequently had a positive impact on Asian stock indices on Tuesday, including Indonesia's main index (IHSG). Moreover, positive news from both Australia and China were well-received as well as the higher metal price (reflected by Hong Kong's rising Hang Seng Index). Amid this positivity, investors took the opportunity to enlarge their stock portfolios.
Last week Friday, American stock markets were not able to maintain a positive trend due to Nonfarm Payrolls that increased below expectation. Moreover, concerns about a spreading bird flu epidemic in China in combination with increased political tensions in Korea impacted on Monday's trading day (8 April 2013) of the Indonesia Stock Exchange (IHSG). The index had to absorb a sell-off, thus closing lower to 4,897.52, an 0.58 percent decline.
The Indonesia Stock Exchange (IHSG) experienced a mixed week. At the start of the week, the index rose, but towards the end of the week it weakened, although ending in the green on Friday. Recently, the IHSG has hit record levels, and this makes market participants worried that the index might fall in case there emerge negative market sentiments. These concerns are what made the index turn away from the next psychological boundary: 5,000 points.
On Thursday 4 April 2013, market players were hoping that the Indonesia Stock Exchange (IHSG) would climb beyond the psychological level of 5,000. However, the presence of negative market sentiments - and the overbought condition of the IHSG - were used as reasons to engage in profit taking. It consequently pushed down Indonesia's main financial market indicator to the level of 4,922.61, an 1.18 percent fall compared to Wednesday's trading day.
Despite positive results of monthly US Factory Orders and Economic Optimism, it did not support Asian stock markets up to the end of Wednesday's trading day. The Indonesia Stock Exchange (IHSG), on the other hand, maintained its upward movement to reach 4,981.47, a 0.49 percent gain. Matters that supported the IHSG's performance to yet another new record high level, were well-received 2012 company reports as well as expected dividend payouts.
Usually, news about inflation is not well-received by market participants. Particularly when inflation turns out to be higher than expected. This time, however, something interesting happened in Indonesia. Although the country's March inflation rate was high (5.90 percent year-on-year), it was not followed up by a negative response of market players. In fact, the inflation rate seems to have strengthened the Indonesia Stock Exchange (IHSG), which gained 0.40 percent on Tuesday.
With a number of important global stock exchanges still closed due to Easter, it seemed that the Indonesia Stock Exchange (IHSG) lacked a reference point to which it could cling. It is also likely that market participants have already consumed most of the 2012 corporate company reports and are therefore not waiting for new data of listed companies. Moreover, today's announcement of the relative high inflation rate of March did not support the IHSG either.
Yesterday, Statistics Indonesia (BPS), a non-departmental government institution, released Indonesia's export and import numbers of February 2013. Indonesia's imports reached US $15.32 billion, while its exports stood at US $14.99 billion. It has thus resulted in the continuation of a trade deficit (US $327.4 million). For Indonesia, which always reported trade surpluses until last year, it is a worrying scenario as the trade deficit and higher inflation put pressure on the IDR rupiah.
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