After Federal Reserve Chair Janet Yellen's speech late last week, markets are increasingly expecting to see a US interest rate hike this month. In her speech in Chicago on Friday (03/03), Yellen said the Fed will adjust its monetary policy (specifically the fed funds rate) in case US employment and inflation continue to evolve in line with the Fed's expectations. The next Federal Open Market Committee (FOMC) meeting is scheduled for 14-15 March 2017 and therefore it is believed only disastrous US labor market data can block an interest rate hike this month.

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The International Monetary Fund (IMF) is optimistic about economic growth of Indonesia in the foreseeable future. In its latest report the Washington-based institution says Indonesia's solid economic policies and increased household consumption support strong growth. The stronger rupiah and low inflation have caused people's purchasing power to strengthen. This is a major positive boost for the economy as household consumption accounts for more than 55 percent of total economic growth in Southeast Asia's largest economy.

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Sales of steel in Indonesia are expected to grow 7 percent year-on-year (y/y) to 15 million tons in 2017, from an estimated 14 million tons of steel sales this year. This growth is attributed to rising infrastructure development in Indonesia and the lower gas price (which is expected to be a reason for the nation's steel manufacturers to boost output). Purwono Widodo, Director for International Relations of the Indonesian Iron and Steel Association (IISIA), said steel sales in Indonesia fell in 2015 but rebounded in 2016.

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Indonesia's benchmark thermal coal price (Harga Batubara Acuan, or HBA) - a monthly price that is set by Indonesia's Energy and Mineral Resources Ministry, and which is based on domestic and international coal indices - continued its impressive rally. In December 2016 the HBA was set at USD $101.69 per metric ton, up nearly 20 percent from the HBA in the preceding month. It is now at its highest level since May 2012. Moreover, price growth between November and December was the steepest monthly rise ever in the history of the HBA.

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Steel consumption in Indonesia is expected to rise to 13-14 million tons in 2016, from 11.3 million tons in the preceding year. Growth is supported by infrastructure development in Indonesia. Data from the Southeast Asia Iron and Steel Institute (SEAISI) shows that steel consumption in Indonesia rose 11 percent year-on-year (y/y) to 6.4 million tons in the first half of 2016. In fact, many local companies are currently buying steel to fill their warehouses as the steel price tends to be highest in the January-February period.

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Ever since China decided to streamline its coal industry by limiting output (combating the local oversupply), global coal prices have jumped sharply. Indonesia's benchmark thermal coal price (known as the Harga Batubara Acuan, or HBA) - a monthly price that is set by Indonesia's Energy and Mineral Resources Ministry and is based on domestic and international coal indices - soared 22.9 percent (m/m) to USD $84.89 per metric ton in November 2016 (from USD $69.07 per ton in the preceding month).

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Indonesia's thermal coal price (in Indonesian: Harga Batubara Acuan, or HBA), a monthly price set by Indonesia's Energy and Mineral Resources Ministry and which is based on domestic and global coal prices, surged further in October 2016. The HBA soared 8.04 percent month-on-month (m/m) to USD $69.07 per metric ton from USD $63.93 per ton in the preceding month. Indonesia's HBA price is now at its highest level since August 2014. This rally is mainly supported by rising coal demand in China.

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Indonesia is expected to end the prolonged economic slowdown, finally, in 2016. Between 2011 and 2015 the nation's gross domestic product (GDP) continued to slide amid sluggish global growth, tumbling commodity prices and domestic changes (higher interest rate environment in 2013-2015 to combat sharply rising inflation as a result of subsidized fuel price reforms). In 2016 this prolonged slowdown will most likely end. Based on the latest forecasts, the Indonesian economy should expand by around 5.0 percent (y/y) this year, up from a growth pace of 4.7 percent in 2015.

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When the United Kingdom (UK) decided to leave the European Union (the so-called Brexit) through a referendum that was held on 23 June 2016, global markets were in shock. While these markets and the UK economy have recovered from the shock (although the pound remains near a 30-year low and Britain lost its AAA rating implying that the cost of government borrowing becomes higher) there are still some concerns about the (negative) impact of Brexit on emerging market economies in Asia, including Indonesia.

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Although the economy of Indonesia will continue to face challenges in 2017, there are a couple of matters that give rise to optimism about accelerating economic growth. These were the conclusions drawn at the Entrepreneur Networking Forum that was held by Bank Tabungan Negara Pensiunan Nasional in Bandung (West Java) on Wednesday (14/09). Although expectations were recently revised down (due to government budget cuts), Indonesian economic growth is still set to rebound in 2016 after having experienced several years of slowdown.

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Worldwide, most stock indices fell on Wednesday (07/08), particularly Japan's Nikkei index, after it has been speculated that the Federal Reserve may phase out the third round of its quantitative easing program in September 2013. This program, involving a monthly USD $85 billion bond-buying package, aims to spur US economic growth while keeping interest rates low. However, one important side effect has been rising stock markets around the globe. Now the end of QE3 is in sight, investors shy away from riskier assets.

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As I stated before, mixed sentiments continue to influence the performance of Indonesia's main stock index (IHSG). During Thursday's trading day (01/08), the index moved sideways. News that the Federal Reserve intends to continue its bond-buying program made a good impact. However, this positive sentiment was offset by the release of Indonesia's high July inflation rate as well as the country's continued trade deficit. At the end of the day, the IHSG managed to post a gain as it received support from rising stock indices in Asia.

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Last week (22-26 July 2013), Indonesia's main stock index (IHSG) ended 1.39 percent down at 4,658.87. The daily value of transactions on the regular market narrowed to an average of IDR 3 trillion (USD $300 million) from IDR 3.84 trillion in the previous week. Foreigners still recorded net sales amounting to IDR 92.9 billion (USD $9.3 million). Lack of positive sentiments, financial results of companies that were below expectation and the continued weakening of the rupiah against the US dollar resulted in the decline of the index.

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Indonesia's Composite Index (IHSG), the main stock index of Indonesia, went back into negative territory on Wednesday (24/07) with all sectors closing in the red. Worst performing sectoral indices were construction, agriculture and the miscellaneous industry. This development was in line with the Asian region that showed mixed performances after HSBC's Chinese manufacturing PMI contracted. Stock indices in Europe and the United states, that both close hours after the IHSG ends its daily session, were more positive on Wednesday.

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Indonesia's main stock index (IHSG) was not able to continue yesterday's rise as investors, particularly domestic investors, engaged in profit taking. Foreign investors, who were net buyers of Indonesian assets, were not able to guide the IHSG to positive territory. Mixed Asian stock indices, responding to weak Chinese data, did not support Indonesia's index. Moreover, market participants expect that the rupiah will continue its weakening trend and have begun speculating whether the benchmark interest rate (BI rate) will be raised again.

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Yesterday's rising indices on Wall Street, high expectations of companies' financial reports and positive statements regarding economic growth in China resulted in a good day at the Indonesia Stock Exchange (IDX). Indonesia's main stock index, the IHSG, rose 1.88 percent to 4,767.16 on Tuesday (23/07), even though technical indicators seemed to predict a weakening of the index. Also the continued fall of the Indonesian rupiah did not turn investors away from the market. In fact, foreign investors were net buyers of Indonesian stocks.

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As I wrote before, profit taking in combination with mixed movements of global stock indices resulted in the limited movement of Indonesia's main stock index (IHSG) on Monday (22/07). The IHSG was corrected 0.96 percent to 4,678.98. All of the sectoral indices weakened, except for the plantation and mining sectors. As there were no positive news publications that would make investors buy assets, they decided to engage in profit taking after the IHSG had risen for five consecutive days.

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The Indonesian rupiah (IDR) is experiencing one of its worst losing streaks in a decade. On Friday (19/07), the currency weakened to IDR 10,070 against the US dollar, which implies a devaluation of 4.14% in 2013 so far. The central bank of Indonesia, Bank Indonesia, does all it can to support the currency: the country's lender of last resort supplies dollars to the market triggering the reduction of foreign reserves from USD $105 million at end-May to $98 million at end-June, and raised its benchmark interest rate (BI Rate) by 50 bps to 6.50%.

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Indonesia's main stock index (IHSG) went up 0.89 percent to 4,720.44 on Thursday (18/07). The index was supported by developments in the United States. On Wednesday (17/07), Ben Bernanke spoke to the US Congress and said that the Federal Reserve is likely to continue its bond-buying program in 2013 and may gradually withdraw the quantitative easing program in 2014. But only if economic recovery of the US provides the good context. This message supported the IHSG although foreign investors continued to record a net sale.

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The recovery in global palm oil prices that seemed to have started last spring, has ended. A few months ago, optimism had colored expectations of many analysts as palm oil prices went up about 10 percent between early May and mid-June, after tumbling 30 percent in 2012 (causing that palm oil was one of the worst performing commodities in terms of price growth last year). However, the palm oil price increase earlier this year was merely the result of falling production rates in Indonesia and Malaysia, the world's largest palm oil producers.

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