Indonesia Stock Index Continues Recovery after Fuel Subsidy Decision

When European indices mostly opened positive on Tuesday, it became certain that the IHSG would end in the green zone. On Tuesday’s trading day, the IHSG rose to 4,840.45 points, a 1.38 percent increase. Foreigners were still mostly selling their Indonesian stock portfolios, while domestic investors kept recording a net buy.

The IDR rupiah was not able to continue its strengthening course yesterday as market players let go of Asian currencies ahead of the Federal Reserve's meeting on Wednesday (19/06). It is speculated that the Fed will shed some light on the continuation or scaling back of its bond-buying stimulus program (quantitative easing). Moreover, the Bank of Japan’s announcement of an increase in Japan's current account, which resulted in a weakening Yen, and Australia’s central bank statement that the Australian dollar may weaken, contributed to negative market sentiments. Lastly, an increase in Indonesian bond yields (tenor 10 years) as well as lower Indonesian consumer confidence put downward pressures on the rupiah.

| Source: Bank Indonesia

Asian stock indices were mixed, with a falling trend, despite rising US indices the previous day, as the market responded negatively to the increase in US house prices because that might be one of the indicators that make the Fed decide to reduce its stimulus program.

China seems to intend to limit credit growth to avert credit from bubbling. As a result property stocks were mostly sold. Foreign direct investments in China also recorded a slowing down. But many market players are postponing any trading decisions until the Fed has given more clarity regarding its stimulus program.

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