Indonesian Stocks Falling on Possible Greece Exit & Fed Meeting
In line with the performance of most other stock indices in Asia today (15/06), Indonesia’s benchmark Jakarta Composite Index (IHSG) fell over one percent in the first trading session. Primary reasons for this weak performance are concerns about stalled negotiations between Greece and its Eurozone creditors. Negotiations broke down without a deal on the bailout aid causing raising worries about a Greek default on its debt (a payment is due at the end of this month) as well as a Greek exit from the Eurozone (“Grexit”).
Moreover, markets are believed to be waiting for the two-day policy meeting of the US Federal Reserve (Federal Open Market Committee, abbreviated FOMC) which is scheduled to start on Tuesday 16 June 2015. Market participants are eager to learn any indication of the timing of an interest rate hike this year. Indices on Wall Street fell at the end of last week after positive consumer data capped a week of solid economic reports, hence increasing expectation that the Federal Reserve is on track to raise interest rates as early as this autumn.
On Sunday (14/06), negotiations between the leftist Greek government and its Eurozone creditors regarding bailout funds broke down within one hour as Greece failed to present new concessions to secure funding for the debt payment (1.6 million euros) to the International Monetary Fund (IMF). The Greek government, on the other hand, said its Eurozone creditors should become “more realistic”. As such, a Grexit is becoming more likely and markets may need to factor this in in the days ahead. The next meeting of Eurozone Finance Ministers (on 18 June 2015) is now being regarded as a potential “make-or-break session”.
Indonesian stocks seem not supported by the USD $950 million trade surplus in May 2015. Although the surplus is good news, a closer look at the data signal weakening economic activity. Badan Pusat Statistik (Statistics Indonesia) announced today that Indonesian imports were down 21.4 percent (y/y) to USD $11.6 billion, while Indonesian exports were down 15.2 percent (y/y) to USD $12.6 billion in May.
Jakarta Composite Index (IHSG):
Meanwhile, the Indonesian rupiah had appreciated 0.04 percent to IDR 13,329 per US dollar according to the Bloomberg Dollar Index by 12:24 am local Jakarta time. However, Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) depreciated 0.12 percent to IDR 13,333 per US dollar on Monday (15/06).