Indonesia Stock Market & Rupiah Update: China, Japan & Oil
Asian stocks were mixed on Monday (01/02). However, Indonesia's benchmark Jakarta Composite Index rose 0.21 percent to 4,624.63 points after a volatile trading day (one hour before trading closed, the index was down more than one percent). Furthermore, the Indonesian rupiah appreciated markedly, while there occurred inflows into bonds. It seems that Japan's surprise move to introduce negative interest rates managed to offset the negative impact of weak manufacturing activity in China and falling crude oil prices.
This morning it was announced that China's official manufacturing purchasing manager's index (PMI) fell to 49.4 in the first month of 2016, down from a reading of 49.7 in the preceding month and down from analyst estimates (generally at 49.6). China's manufacturing activity contracted at its fastest pace since August 2012. Growth in China's services sector also slowed. The non-manufacturing PMI in January fell to a reading of 53.5 from 54.4 in the preceding month.
Meanwhile, oil prices declined more than 2 percent on Monday, hence causing downward pressure on markets. Last week, markets were supported by rallying oil prices when US crude and Brent futures rose 10.8 and 14 percent, respectively, on the back of talks between OPEC and non-cartel nations to curtail the global oil production. Today, however, oil fell on slowing manufacturing activity in China.
Positive sentiments stemmed from higher US stocks on Friday (29/01) as the Dow Jones industrial average climbed 2.5 percent, the Standard & Poor's 500 index rose 2.5 percent, and the Nasdaq composite index jumped 2.4 percent when Microsoft, Visa and other tech stocks made the largest gains during widespread buying on Wall Street.
Meanwhile, the rupiah appreciated 1.06 percent to IDR 13,632 per US dollar (Bloomberg Dollar Index), the most since 15 October 2015, on speculation that Indonesian assets will lure more inflows amid monetary easing by some of the world’s major central banks. Moreover, US economic growth in Q4-2015 was disappointing at 0.7 percent year-on-year due to subdued exports and inventories. This could mean that the US Federal Reserve will wait before deciding to raise its key Fed Fund Rate again.
Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) also appreciated 1.06 percent to IDR 13,699 per US dollar on Monday (01/02).
Indonesian Rupiah versus US Dollar (JISDOR):
| Source: Bank Indonesia