Indonesia Stock Market & Rupiah Update: China Concerns Persist
With the exception of Japan, the majority of stock markets in Asia were under pressure on Wednesday (21/10) on concern about China's economic growth as Japan's exports to China fell 3.5 percent year-on-year in September. Today, it was announced that Japan posted a USD $95 billion trade deficit in September, worse than previously estimated, primarily on weakening exports due to slowing economic growth in China. However, Japanese stocks rose on stimulus hopes.
The rupiah is under pressure as September US housing starts (+6.5 percent) were better than market estimates, while oil prices continued to fall. In line with most emerging market currencies in Asia, the rupiah weakened on persistent concerns about slowing economic growth and falling commodity prices. Both the rupiah and Malaysia's ringgit fell to two week lows. By 16:00 pm local Jakarta time, the rupiah had depreciated 0.30 percent to IDR 13,724 per US dollar (Bloomberg Dollar Index). It is also believed that domestic companies in Indonesia are increasing US dollar purchases for month-end payments.
Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) depreciated 0.45 percent to IDR 13,696 per US dollar on Wednesday (21/10).
Indonesian Rupiah versus US Dollar (JISDOR):
| Source: Bank IndonesiaMeanwhile, Indonesia stocks rose slightly. The benchmark Jakarta Composite Index climbed 0.42 percent to 4,605.23 points. Despite negative market sentiments brought about by China's slowdown, shares of listed palm oil plantations performed well as Indonesia, the world's leading palm oil producer and exporter, cut its production estimate for 2016 due to the impact of the El Nino weather phenomenon (which brings dry weather to Southeast Asia). Reduced output in the world's top producer should result in higher palm oil prices next year. Shares of PP London Sumatra Indonesia rose 9.56 percent, Astra Agro Lestari climbed 5.84 percent, Sampoerna Agro were up 2.28 percent, and Gozco Plantations rose 2.17 percent.
Jakarta Composite Index (IHSG):
There is also optimism that Indonesia's economic growth will accelerate in the third quarter. Indonesian Finance Minister Bambang Brodjonegoro expects Indonesia's Q3-2015 growth at 4.9 percent (y/y), while Bank Indonesia put it at 4.85 percent (y/y). Both estimations are up from the 4.67 percent growth realization in the second quarter of 2015. Accelerating GDP growth in the third quarter would be a good performance because, as can be seen in the table below, normally GDP growth slows from the second to the third quarter.
Indonesia's Quarterly GDP Growth 2009–2015 (annual % change):
| Year | Quarter I |
Quarter II | Quarter III | Quarter IV |
| 2015 | 4.72 | 4.67 | ||
| 2014 | 5.14 | 5.03 | 4.92 | 5.01 |
| 2013 | 6.03 | 5.81 | 5.62 | 5.72 |
| 2012 | 6.29 | 6.36 | 6.17 | 6.11 |
| 2011 | 6.45 | 6.52 | 6.49 | 6.50 |
| 2010 | 5.99 | 6.29 | 5.81 | 6.81 |
| 2009 | 4.60 | 4.37 | 4.31 | 4.58 |
Source: Statistics Indonesia (BPS)