The G-20 summit in St Petersburg (Russia), which is held on Thursday (05/09) and Friday (06/09), is not expected to result in unanimous support for a military action against Syria as China and Russia are opposing strongly to such an action. Indonesia's president Susilo Bambang Yudhoyono stated that Indonesia takes the middle road regarding the Syria-case. Apart from Syria, other topics that are discussed include the possible ending to the Federal Reserve's quantitative easing program, global economic growth and financial stability.

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On Wednesday (04/09), the International Monetary Fund (IMF) released a report that describes a change in the current global economic dynamic as developed economies are showing signs of recovery, while growth in emerging markets is slowing down. These two developments are interrelated because stagnating developed economies from the late 2000s meant that investors started to look for lucrative assets in rapidly-growing emerging markets, including Indonesia.

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The International Monetary Fund (IMF) expects the economy of Indonesia to expand by 5.25 percent in 2013, which is considerably lower than the IMF's earlier forecast. In its World Economic Outlook, released in April 2013, the institution set economic growth of Indonesia at 6.3 percent. However, after emerging markets were hit by large capital outflows when the Federal Reserve began to speculate about an end to its quantitative easing program (QE3), Indonesia's GDP growth assumptions were quickly revised downwards.

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Indonesia's largest telecommunication & network provider Telekomunikasi Indonesia (Telkom) has conducted a stock split with a ratio of 1:5 yesterday (29/08). The company, which is majority owned by the Indonesian government and has a dominating market share of around 47% in terms of mobile phone subscribers in Indonesia, decided to conduct the stock split to increase the company’s share liquidity. A cheaper price will be more appealing to investors. The stock split was agreed upon at the general shareholders' meeting on 19 April 2013.

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Indonesia's central bank (Bank Indonesia) decided to raise its benchmark interest rate (BI rate) by 50 basis points to 7.0 percent on Thursday (29/08) in order to support the weakening rupiah amid slowing global economic growth. The rupiah has been on a long losing streak and has fallen to its lowest level against the US dollar in four years. The BI rate had already been raised in June and July from a historically low 5.75 percent to 6.50 percent. Today, an extra meeting was scheduled to discuss policy measures.

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Indonesia's banking sector is expected to have no difficulties in coping with current financial turmoil in Indonesia's economy. The country's banking industry is much stronger and healthier now than when the crisis in 1997-1998 or 2008 erupted. There have been reports that a few small banks have used the central bank's overnight lending facility, but various stress tests indicate that the banking sector is strong. Gross non performing loans per June 2013 have been kept below1.9 percent, which is significantly lower compared to previous periods.

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Finance minister Chatib Basri said that the Indonesian government should revise its outlook for GDP growth in 2014 from 6.4% (mentioned in the 2014 State Budget) to about 6.0%. A more realistic outlook, which is in line with the current global and domestic financial context, is needed. Global uncertainty due to the possible ending of the Federal Reserve's quantitative easing program has resulted in capital outflows from emerging markets, including Indonesia. Various countries, developed and emerging ones, have lowered outlooks for 2014 GDP growth.

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Both China's imports and exports in July 2013 showed a rebound as they increased above expectation. Exports of the world's second-largest economy rose 5.1 percent (YoY), while imports surged 10.9 percent (which suggest improving domestic consumption). These results led to most Asian markets being up on Thursday (08/08). China's economy has been slowing down amid weak global demand and efforts to avert a credit boom. In 2012, the country's economy expanded 7.8 percent, the slowest pace in 23 years.

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Emerging markets, such as Indonesia, have been feeling the impact of a recovering economy in the United States. Last month, the Federal Reserve announced that, if the economy of the USA continues its improving trend, it will end its quantitative easing program gradually in 2013 until a complete stop in 2014. As Indonesia is one of the emerging economies that benefited from the spillover effects of the Fed's monthly bond-buying program, the country now feels the negative impact of the possible stop to the program.

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Today, three Indonesian companies will be listed on the Indonesia Stock Exchange (IDX). These companies are Victoria Investama (VICO), Multipolar Technology (MLPT), and Bank Mestika Dharma (BBMD). This year so far, 21 Indonesian companies have conducted their initial public offering (IPO). Eight others are still planning to conduct one in 2013. Indonesia's stock exchange has seen large capital outflows in the last month due to international concerns about a stop to the US quantitative easing program.

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On Wednesday (18/12), the Federal Reserve announced to slightly scale back its quantitative easing program starting from January 2014. The reduction of the bond-buying program involves USD $5 billion of mortgage-backed securities and USD $5 billion of US treasury securities. Thus, the Federal Reserve will purchase a total of USD $75 billion worth of bonds per month instead of the current pace of USD $85 billion. For the moment, this policy change has an euphoric effect on global stock markets.

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The announcement that the Federal Reserve (FED) will start its quantitative easing tapering in January 2014, while keeping interest rates low, made stock indices in Asia rise, including Indonesia's benchmark stock index (IHSG), although mining and property stocks were able to limit today's gain. The IHSG rose 0.85 percent to 4,231.98 points on Thursday (19/12). The Indonesia rupiah exchange rate (IDR), however, was down as future tighter US dollar supplies causes market participants to buy US dollar now.

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On Thursday 12 December 2013, Indonesia's central bank (Bank Indonesia) announced that the country's benchmark interest rate (BI rate) remains unchanged at the level of 7.50 percent in December 2013. This announcement was a bit surprizing as about 80 percent of analysts expected Bank Indonesia to raise the BI rate in order to support the depreciating Indonesia rupiah exchange rate. Starting the year at IDR 9,670 per US dollar, the rupiah has fallen around 25 percent to IDR 12,081 per US dollar.

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The central bank of Indonesia (Bank Indonesia) estimates that Indonesia's current account deficit will ease to 3.5 percent of the country's gross domestic product (GDP) by the end of 2013. Indonesia's wide current account deficit has been one of the major financial troubles this year and managed to weaken investors' confidence in Southeast Asia's largest economy. Thus, Indonesia became one of the hardest hit emerging countries after the Federal Reserve started to speculate about an ending to its quantitative easing program.

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In Bank Indonesia's board of governors' meeting, which was held on Thursday (12/12), it was decided to maintain the country's benchmark interest rate (BI rate) at 7.50 percent. This decision was in line with market expectation but was unable to support the Jakarta Composite Index and rupiah exchange rate. The lending facility and deposit facility interest rates were also maintained at 7.50 percent and 5.75 percent respectively. Bank Indonesia decided not to change the rate as Indonesia's inflation outlook for 2014 is still within target.

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Both the Jakarta Composite Index (Indonesia's benchmark stock index) and the Indonesia rupiah exchange rate are under pressure this morning as market participants are waiting for results of the central bank's Board of Governor's meeting that is held today (12/12) in Jakarta. Speculation has emerged that Indonesia's central bank (Bank Indonesia) will raise its benchmark interest rate (BI rate) one more time in 2013 in order to combat the country's current account deficit as well as mitigate the impact of a possible winding down of QE3.

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Although Indonesia's benchmark interest rate (BI rate) was kept at the level of 7.5 percent (in line with market expectation) today (12/12), it was not able to support the country's stock index. Indonesia's IHSG index fell 1.39 percent to 4,212.22 points. The index was negatively impacted by Asian stock indices that were down due to concerns about the looming end of the Federal Reserve's quantitative easing program. This made investors' positive reaction to the BI rate of temporary nature. Weak openings in Europe increased downward pressure.

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Throughout the morning, the Indonesia rupiah exchange rate showed volatile movement on Tuesday (10/12). In the Bloomberg Dollar Index, the currency was up 0.45 percent to IDR 11,920 per US dollar at 16:20:51 local Jakarta time. The rupiah's performance is volatile because negative sentiments are brought on by improving economic data from the USA, causing a strengthening US dollar, while positive market sentiments are brought on by the new fiscal policies that were announced by the Indonesian government.

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Asia's stock indices were up after various US economic data (including non-farm payrolls and consumer confidence) were better than expected, including Indonesia's benchmark stock index (also known as the Jakarta Composite index or IHSG). The index climbed 0.80 percent to 4,214.34 points on Monday (09/12). Supported by foreign net buying, almost all sectoral indices of the IHSG were up. The economic policy package that was released by the Ministry of Economy this afternoon also provided support for the index and the rupiah.

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After appreciating on Monday morning (09/12), the Indonesia rupiah exchange rate started to weaken against the US dollar in the afternoon. At 15:10:29 local Jakarta time, the rupiah stood at IDR 11,970 per US dollar in the Bloomberg Dollar Index, a 0.05 percent depreciation from the start of the day. The rupiah exchange rate is fluctuating due to positive sentiments caused by Indonesia's October trade surplus as well as China's low inflation and negative sentiments brought on by the looming end of the Federal Reserve's quantitative easing program.

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