With the exception of Japan, the majority of stock markets in Asia were under pressure on Wednesday (21/10) on concern about China's economic growth as Japan's exports to China fell 3.5 percent year-on-year in September. Today, it was announced that Japan posted a USD $95 billion trade deficit in September, worse than previously estimated, primarily on weakening exports due to slowing economic growth in China. However, Japanese stocks rose on stimulus hopes.

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The Indonesian rupiah is not having a good day as it was down 1.05 percent to IDR 13,659 per US dollar by 10:45 am local Jakarta time (Bloomberg Dollar Index) on Tuesday (20/10), weakening the most in a week. In line with most other emerging market currencies in Asia, the rupiah is falling presumably on concern about weak economic growth in China. Yesterday, Chinese authorities announced the world's second-largest economy expanded 6.9 percent (y/y) in Q3-2015. This result is slightly better than estimates but does also constitute a six-year low, hence negatively affected exports of its trading partners.

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Emerging market assets, including Indonesian stocks and the rupiah, are being supported today by the release of China's official third quarter gross domestic product (GDP) growth figure. The economy of China expanded 6.9 percent (y/y) in Q3-2015, slightly beating expectations (at 6.8 percent y/y) on relatively robust spending by Chinese consumers. Most emerging market assets strengthened after the news as a slightly better Chinese economy (implying higher Chinese demand) impacts positively on other countries in the Asian region on expectation of improving export performance.

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Agus Martowardojo, Governor of the central bank of Indonesia (Bank Indonesia), said there are still 320 local companies that have not complied with the central banks' hedging requirements regarding foreign loans. A Bank Indonesia study conducted in late-2014 showed that the country’s private sector foreign debt is vulnerable to several risks i.e. currency risks, liquidity risks and overleverage risks due to unhedged loans.

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As expected, the central bank of Indonesia (Bank Indonesia) left its benchmark interest rate (BI rate) unchanged at 7.50 percent at the October Board of Governor's meeting on Thursday (15/10). Meanwhile, Bank Indonesia maintained the deposit facility rate and the lending facility rate at 5.50 percent and 8.00 percent, respectively. Rates were left unchanged as the global economic outlook remains highly uncertain. This jeopardizes the stability of the Indonesian rupiah.

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After Islamic New Year celebrations, Indonesia’s financial markets reopened on Thursday (15/10). The sharp appreciation of the Indonesian rupiah on Thursday morning is remarkable. By 10:10 am local Jakarta time, the rupiah had appreciated 2.36 percent to IDR 13,295 per US dollar (Bloomberg Dollar Index) hence extending last week’s gains when Indonesia’s currency strengthened around 9 percent against the greenback. Emerging markets assets are still gaining on signs that the Federal Reserve will not raise US interest rates in the short-term.

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In a draft regulation, Indonesia's Financial Services Authority (OJK), the government agency that regulates and supervises the financial services sector, proposes that the country's leading banks have set aside more capital - between 1 and 3.5 percent of their risk-weighted assets (a "capital surcharge") by December 2015 - as a buffer against financial market volatility risks. The new policy aims to strengthen Indonesia's financial system amid the country's economic slowdown and severe external pressures (looming higher US interest rates and China's slowdown).

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On Tuesday (13/10), Chinese authorities announced that the country's trade balance widened to 376.2 billion yuan in September 2015, beating forecasts. China's exports contracted less than expected at -1.1 percent. However, China's imports (-17.7 percent) plunged more than expected and now recorded the eleventh month of straight declines. Although the balance is better than had been forecast, China's latest import and export data show again that the world's second-largest economy is plagued by a persistent slowdown.

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The Indonesian rupiah is slightly weakening on Monday (12/10) as market participants are responding to Federal Reserve Vice Chairman Stanley Fischer's remarks in Lima (Peru) where he attended the latest IMF meeting as well as a banking seminar. Fischer said that there could still be a Fed Fund Rate hike before the end of the year, provided that US economic data (and global circumstances) allow such a move. Based on the Bloomberg Dollar Index, the rupiah had depreciated 0.02 percent to IDR 13,414 per US dollar by 12:15 pm local Jakarta time.

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On 11 October 2015, Indonesia Investments released the latest edition of its newsletter. This free newsletter, which is sent to our subscribers once per week, contains the most important news stories from Indonesia that have been reported on our website in the last seven days. Most of the topics involve economic subjects such as the government's third stimulus package, the remarkable performance of Indonesian stocks and the rupiah, growth forecasts from the World Bank and the IMF, Indonesian car sales, a palm oil industry update, and more.

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The number of air passengers in Indonesia will most likely fail to meet its growth target in 2014. Based on government data, the number of air passengers in Southeast Asia’s largest economy reached 47.5 million in the first eight months of 2014, a 5.82 percentage point growth from the same period last year. However, the Indonesia National Air Carrier Association (INACA) initially targeted annual passenger growth in the range of 12-15 percent for 2014. Amid slowing economic growth, people’s purchasing power has declined.

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The market showed today (27/10) that the composition of Indonesian President Joko Widodo’s cabinet did not live up to expectations. On Sunday afternoon, Widodo had announced the names of the ministers inside his Working Cabinet (Kabinet Kerja) after having delayed the announcement for almost a week as several of his ministerial candidates needed to be replaced having been red flagged by the country’s Corruption Eradication Commission (KPK). This then heightened expectations that Widodo’s cabinet would constitute a ‘dream team’.

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Indonesian stocks and the rupiah have rebounded on Friday due to several internal and external factors. During the first trading session on Friday (17/10), the benchmark stock index of Indonesia (Jakarta Composite Index, or IHSG) surged 0.94 percent to 4,998.14 points. Meanwhile, based on the Bloomberg Dollar Index, the Indonesian rupiah exchange rate had appreciated 0.26 percent to IDR 12,228 per US dollar by 12:30 pm local Jakarta time. Why do Indonesian stocks and the rupiah perform well on Friday?

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In line with global stock indices, the benchmark index of Indonesia (Jakarta Composite Index, abbreviated IHSG) declined on Thursday’s trading day. Falling indices on Wall Street were a major concern to global investors as weak corporate and economic data may indicate that the economic recovery of the USA is not as structural as previously assumed. The NY empire state manufacturing index, US retail sales, US chain store sales, and US business inventories all weakened and ‘infected’ Asian stock indices, including the IHSG.

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Despite the fact that foreign investors continued to record net selling (IDR 216.9 billion) and despite mostly declining stock indices in Southeast Asia, the benchmark stock index of Indonesia (Jakarta Composite Index, abbreviated IHSG) rose 0.19 percent to 4,922.59 points on Tuesday’s trading day (14/10). The IHSG was particularly supported by rising consumer and manufacturing stocks. Indonesian stocks were also supported by the appreciating rupiah exchange rate.

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Indonesian Finance Minister Chatib Basri said that the lower pace of economic growth in China, the world’s second-largest economy, is a major concern for Indonesia as it leads to declining demand for commodities (and thus places downward pressure on commodity prices). As Indonesia is a major commodity exporter - such as coal, crude palm oil, nickel ore and tin - the country feels the impact of weak global demand for commodities. About 60 percent of Indonesia’s exports are commodities, mostly raw ones.

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Indonesian stocks tumbled at the first trading day of the week as investors are still concerned about the condition of the global economy. Declining stock indices on Wall Street at the end of last week had a negative impact on Asian stock indices, including Indonesia’s benchmark stock index (known as the Jakarta Composite Index, or abbreviated IHSG). The IHSG fell 1.01 percent to 4,913.05, its lowest level since 4 July 2014, on Monday (13/10). Foreign investors recorded net selling of IDR 595 billion (USD $49.6 million).

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In line with the volatile performance of global stocks, led by indices on Wall Street, the benchmark stock index of Indonesia (Jakarta Composite Index, or abbreviated IHSG) showed a volatile performance over the past week. US stocks mostly declined - except for the sharp rebound on Wednesday after Federal Reserve minutes signalled no higher US interest rates anytime soon - on concerns about the global economy (particularly the Eurozone), looming higher US interest rates, and the appreciating US dollar (hurting US exports).

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It was a relief for investors to learn that the benchmark stock index of Indonesia (Jakarta Composite Index, or IHSG) rebounded on Thursday (09/10) after having experienced a sharp decline on the previous day. The IHSG was supported by rising Asian stocks after indices on Wall Street had surged on Wednesday (08/10). Wall Street was up as minutes of the latest Federal Reserve meeting signalled that US interest rates will remain low 'for a while'. Another positive factor was that today’s appreciation of the Indonesian rupiah exchange rate.

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The benchmark stock index of Indonesia (Jakarta Composite Index, abbreviated IHSG) took another dive on Wednesday (08/10). The decline was not only caused by the negative influence of declining stock indices in the USA and Europe on the previous day, triggered by the downgraded global economic growth forecast released by the International Monetary Fund (IMF) but also because the market responded negatively to the voting result for the post of speaker of the People’s Consultative Assembly (or MPR).

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