Indonesian Stocks & Rupiah Update: Ending a Weak Quarter on a High Note
Most Asian stock markets were stronger on Wednesday, led by Japan's Nikkei 225 Index which rose 2.70 percent on expectation of further government stimulus measures. Meanwhile, Indonesia's benchmark Jakarta Composite Index rose 1.09 percent to 4,223.91 points supported by the region's rising stock indices as well as on the back of the second installment of Indonesia's economic policy package. Meanwhile, the rupiah appreciated 0.26 percent to IDR 14,653 per US dollar (Bloomberg Dollar Index).
Jakarta Composite Index (IHSG):
However, investors remain cautious as few believe that equity markets have hit a bottom low already. As such, volatility is expected to persist into the fourth quarter of the year. The spotlight will remain focused on the US Federal Reserve's monetary policy. Later today, Fed Chair Janet Yellen is to speech and may shed some light on whether US interest rates are bound to be raised before the year end. In her speech at the university of Massachusetts last week, she said the Federal Reserve was still on track to raise the Fed Fund Rate before the new year.
With regard to US interest rates, markets are eagerly awaiting Friday's key US non-farm payrolls data which provide more information on whether US labor market conditions are solid enough to justify an interest rate hike.
Glencore, the commodity trader and miner that lost about one-third of its value on Monday (28/09) on concern about low commodity prices and the company's debt targets, continued to surge on Wednesday (after having climbed about 10 percent on Tuesday) hence repairing a large chunk of its losses. This strong rebound managed to calm global markets as previously concern had emerged that Glencore could become the mining sector's Lehman.
After the last trading day of Q2-2015 was finished, Asian markets officially experienced the worst quarter since the financial crisis four years ago. Besides looming higher US interest rates, global markets were hit in Q3-2015 by China's decision to devalue its yuan in August causing the Shanghai Composite Index to lose about 25 percent of its value, while triggering international concern about the hard landing of China's economy (global selloff) hence causing anxiety about global economic growth and further falling commodity prices. Moreover, a weaker yuan put severe pressure on other emerging market currencies (including the rupiah) as these currencies need to remain competitive.
Yesterday, the International Monetary Fund (IMF) warned that global equity markets face a liquidity squeeze after several years of low interest rates and monetary easing by the world's key central banks (Federal Reserve and its counterparts in Europe and Japan) that encourages risk-taking.
Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) appreciated 0.48 percent to IDR 14,657 per US dollar on Wednesday (30/09).
Indonesian Rupiah versus US Dollar (JISDOR):
| Source: Bank Indonesia