Indonesian Stocks & Rupiah: Pressures due to China Inflation & Fed Rate Hike
Most stock indices in Asia fell on Tuesday's trading day (10/11) on concern that China's stalling economy negatively impacts on the pace of global economic growth, while markets are also bracing for a looming US interest rate hike before the year-end. Moreover, sentiments in Southeast Asia are not positive as the majority of Q3-2015 earnings reports have been unfavorable. Combined, it triggers a flight to safer haven assets. Indonesia's benchmark Jakarta Composite Index fell 1.08 percent to 4,451.05 points.
Today it was announced that China’s October consumer inflation dipped to (a below forecast reading of) 1.3 percent (y/y), compared with 1.6 percent (y/y) in the preceding month, reigniting concerns about a slowdown in the world’s second-largest economy. Analysts claim that China is now facing deflationary pressure, while it also results in speculation that more government stimulus is to be expected.
Asian markets followed the approximately 1 percent fall of US indices on Wall Street on Monday, the first notable decline in six weeks as investors are concerned about slowing global economic growth due to the stalling economy of China, while the US central bank may raise US borrowing costs by 25 basis points before the year-end.
Jakarta Composite Index (IHSG):
The US dollar slightly depreciated against the majority of emerging market currencies in Asia, taking a break after having appreciated more markedly on preceding trading days due to the surge in October US non-farm payrolls, released late last week. In combination with the US unemployment rate having fallen to 5.0 percent, markets are bracing for a Fed Fund Rate hike in December.
Based on the Bloomberg Dollar Index, the Indonesian rupiah appreciated 0.18 percent to IDR 13,619 per US dollar. Meanwhile, Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) appreciated 0.50 percent to IDR 13,619 per US dollar on Tuesday (10/11).
Indonesian Rupiah versus US Dollar (JISDOR):
| Source: Bank IndonesiaThe Indonesian Finance Ministry announced it sold IDR 9 trillion worth of bonds at an auction on Tuesday (10/11), above the indicative target of IDR 6 trillion, with total incoming bids at IDR 13.68 trillion. The highest bid-to-cover ratio was 1.84 for the one-year t-bills.