Indonesian Stocks & Rupiah Weakening on China & US Data
After opening on Monday (28/09) Indonesian stocks rapidly fell amid mixed Asian markets. The main factor that causes several Asian markets to fall is declining Chinese industrial profits (triggering concern about a deepening slowdown of the world’s second-largest economy). China’s industrial profits fell 8.8 percent in August, down from July’s 2.9 percent drop. By 09:50 am local Jakarta time, the benchmark Jakarta Composite Index was down 1.41 percent to 4,150.27 points.
Shares of Astra International, one of the largest diversified conglomerates in Indonesia and one of the largest companies listed on the Indonesia Stock Exchange in terms of market capitalization, plunged over 4 percent on Monday morning (28/09).
Trade volumes are light in Asia as stock markets in Singapore, Hong Kong and South Korea are closed due to the Mid-Autumn Festival. Moreover, investors are in a ‘wait and see-mode’ ahead of the release of key Chinese data on Thursday. These data are the official September purchasing manufacturing managers’ index (PMI) as well as the final Caixin/Markit PMI.
Meanwhile, strong GDP growth data from the USA last week (US GDP growth was revised up to 3.9 percent q/q in the second quarter of 2015) provide a solid foundation for the Federal Reserve to raise its key Fed Fund Rate before the year-end. US GDP growth was revised up primarily on strong consumer spending. Last week, Federal Reserve Chair Janet Yellen stated that an US interest rate hike in 2015 is still on track. Investors are now waiting for the US non-farm payrolls data that are due coming Friday. The result will inform whether US labour market conditions are strong enough to cope with a tighter monetary policy approach. A Fed Fund Rate hike will most likely trigger severe capital outflows from emerging markets as US yields become more attractive.
The Indonesian rupiah also weakened on Monday morning. By 9:52 am local Jakarta time, the rupiah had depreciated 0.16 percent to IDR 14,717 per US dollar according to the Bloomberg Dollar Index.