Indonesia Stock Exchange (IHSG) Extends 'Winning Streak' on Friday
The decision of Indonesia's central bank (Bank Indonesia) to raise its benchmark interest rate by 50 basis points to 7.00 percent and its deposit facility (Fasbi) by 0.50 percent to 5.25 percent seem to have had a good impact on the value of Indonesia's stocks and the rupiah. Indonesia's benchmark stock index (IHSG) rose 2.23 percent to 4,195.09 points on Friday (30/08), implying a three-day winning streak. Since the first trading day of this year, the IHSG is down 3.47 percent.
Market players have been concerned about Indonesia's current account deficit of USD $9.8 billion in the second quarter of 2013 and high inflation (8.61 percent YoY in July). In combination with the possible ending of the Federal Reserve's quantitative easing program it led to a seriously weakening rupiah and falling benchmark stock index. Investors will be eagerly awaiting the release of Indonesia's August inflation rate that is expected to be released on Monday (02/09) by Statistics Indonesia BPS). If the result is not to the liking of investors, disappointment will translate into a falling stock index.
Market players have been concerned about Indonesia's current account deficit of USD $9.8 billion in the second quarter of 2013 and high inflation (8.61 percent YoY in July). In combination with the possible ending of the Federal Reserve's quantitative easing program it led to a seriously weakening rupiah and falling benchmark stock index. Investors will be eagerly awaiting the release of Indonesia's August inflation rate that is expected to be released on Monday (02/09) by Statistics Indonesia BPS).
Bank Indonesia's mid rate strengthened 0.11 percent to 10,924 against the US dollar on Friday (30/08). Two days before, Indonesia's rupiah had fallen to a four-year low. The central bank lets the currency find a new equilibrium as selling foreign exchange reserves proved ineffective. The reserves have fallen to USD 92.67 at end-July.
Good news came from Japan where manufacturing accelerated, confirmed by a 3.2 percent growth (month-to-month) of industrial output, while inflation rose 0.7 percent in July (year-on-year). Japan's industrial output is expected to continue its growth in the months ahead. However, average household spending and retail sales fell.
India's economic growth has slowed down to 4.4 percent in the second quarter of 2013, a four-year low. This weakening trend is caused by slowing investments, high inflation and weak exports. The government is trying hard to support the rupee in order to restore investor confidence.
Wall Street fell due to concerns about military actions in Syria. The Dow Jones fell 0.21 percent to 14,810.31, the S&P 500 weakened 0.3 percent to 1,632.97, and the Nasdaq fell 0.84 percent to 3,589.87.
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