On 13 December 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 over the last seven days. Most of the topics involve economic matters such as updates on the performance of Indonesian stocks and the rupiah, income inequality, the budget deficit, IPOs on the Indonesia Stock Exchange, but also political topics such as regional elections.

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On the last trading day of the week, Indonesian stocks plunged 1.63 percent to 4,393.52 points, while the rupiah depreciated 0.22 percent to IDR 13,984 per US dollar (Bloomberg Dollar Index). Most Asian indices were weaker as investors are bracing for - most likely - the first Fed Fund Rate hike in nearly a decade. On 15-16 December the US Federal Reserve will hold a crucial policy meeting. Tighter monetary policy in the USA leads to capital outflows from Indonesia as the country is regarded particularly vulnerable to such a move.

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Asian stock indices - including Indonesia's benchmark Jakarta Composite Index which reopened after a market holiday - were mostly in red territory on Thursday (10/12) as investors are cautious ahead of the looming US interest rate hike, expected to be decided upon at the Federal Reserve's next policy meeting (15-16 December), as well as low oil prices and falling US stocks overnight. Moreover, the central bank of China allowed its yuan to depreciate further (to a near four-month low), hence resulting in the resurgence of some fears of a currency war in Asia.

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The Indonesian rupiah is again flirting with the IDR 13,900 per US dollar level after the central bank announced on Monday (07/12) that Indonesia's foreign exchange reserves fell further in November. Based on the Bloomberg Dollar Index, the rupiah had depreciated by 0.19 percent to IDR 13,887 per US dollar at 15:30 pm local Jakarta time on Tuesday (08/12). Other factors that put pressure on the rupiah are the low oil price (giving rise to a strong US dollar), weak trade data from China, and the looming US interest rate hike.

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Today, Indonesian integrated fishery, marine product processing and cold storage company Dua Putra Utama Makmur will be listed on the Indonesia Stock Exchange (IDX), hence becoming the 13th company to have conducted an initial public offering (IPO) on the IDX this year. Previously it was reported that the IPO of Dua Putra Utama Makmur was oversubscribed 1.5 times, reflecting robust demand. Overall, however, the number of IPOs on the IDX has been disappointing in 2015. Next year is expected to be a better year.

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The foreign exchange reserves of Indonesia fell slightly in November. According to the latest data from Indonesia's central bank (Bank Indonesia) the reserves stood at USD $100.24 billion at end-November, down from USD $100.7 billion at the end of the preceding month. The reserves fell on foreign exchange receipts, public foreign debt payments and the central bank's efforts to stabilize the rupiah exchange rate.

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Ceramic sales in Indonesia are projected to decline to IDR 25 trillion (approx. USD $1.8 billion) in 2015 from total sales worth IDR 36 trillion last year. Elisa Sinaga, Chairman of the Indonesian Ceramic Industry Association (ASAKI), said 2015 is a year full of challenges for the domestic ceramic industry due to Indonesia's slowing economic growth (particularly the slowdown of the nation's property sector), high gas prices, higher minimum wages, and the fragile rupiah (having depreciated around 11 percent against the US dollar so far in 2015).

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China's yuan (also known as renminbi) was included in the International Monetary Fund's Special Drawing Rights (SDR) - with a weightage average of 10.91 percent - on Tuesday (01/12), a decision that will take effect on 1 October 2016. Other currencies in the SDR are the US dollar, euro, pound sterling and yen. This move implies that the currency of the world's second-largest economy is increasingly regarded as a global financial instrument and will be increasingly used in transactions across the globe and widely traded on foreign exchange markets.

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Indonesian stocks and the rupiah weakened on Monday morning (30/11). Indonesia's benchmark Jakarta Composite Index (IHSG) was down 0.84 percent to 4,522.09 points, while the Indonesian rupiah had depreciated 0.21 percent to IDR 13,830 per US dollar (Bloomberg Dollar Index) by 11:15 am local Jakarta time. Negative sentiments still stem from China and the looming Fed Fund Rate hike in December, while there are few to none domestic sentiments that can support the nation's assets.

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RSM Indonesia, one of Indonesia's leading audit, tax and financial advisory firms, expects to see more mergers and acquisitions (M&A) in Indonesia in 2016 due to the improving global and domestic economic conditions, a stable rupiah exchange rate, and Indonesian's growing purchasing power. For foreign investors a M&A deal is one of the strategies to enter Indonesia. Up to early November, the total value of M&A deals in Indonesia in 2015 stood at USD $3.53 billion.

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Although the benchmark stock index (known as Jakarta Composite Index or IHSG) started the day in the green zone, it ended down due to profit taking as market participants prefer to wait for the official result of the Indonesian presidential election first. Both presidential candidates (Joko Widodo and Prabowo Subianto) declared a victory based on different unofficial quick count results. This has resulted in political uncertainty in Southeast Asia’s largest economy and thus investors refrain from buying Indonesian assets.

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ICRA Indonesia, an independent credit rating agency and subsidiary of ICRA Ltd. (associate of Moody's Investors Service), publishes a monthly newsletter which provides an update on the financial and economic developments in Indonesia of the last month. In the June 2014 edition, a number of important topics that are monitored include Indonesia's inflation rate, the trade balance, the BI rate, the IDR rupiah exchange rate, and gross domestic product (GDP) growth. Below is an excerpt of the newsletter:

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Initially we were concerned that Indonesia’s benchmark stock index (Jakarta Composite Index) would experience a sudden change of direction - after two days of strong gains at the start of the week - because the preliminary results of the 2014 Indonesian presidential election (based on unofficial quick counts) was mixed at first glance and thus triggers political uncertainty (something which is seriously disliked by investors). However, the index performed remarkably well and rose 1.46 percent to 5,098.11 points on Thursday (10/07).

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Although Asian stock indices tended to decline on Monday’s trading day (07/07) due to profit taking amid expectation that corporate earnings in the first half of 2014 are disappointing, the benchmark stock index of Indonesia (known as Jakarta Composite Index or IHSG) performed remarkably well as foreign investors recorded net buying and the Indonesian rupiah exchange rate appreciated sharply. The main reason why markets were positive in Indonesia on Monday was the strong performance of Joko Widodo in Saturday’s presidential debate.

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Emerging currencies in Asia, led by the Indonesian rupiah exchange rate, strengthened in the past week on positive economic data from the US and China, the world’s two largest economies. Companies in the US added more jobs than expected in June 2014, while manufacturing in China grew at its fastest pace in 2014. Improving economies of the US and China are important for Asian countries as it boosts Asian exports. Moreover, Indonesian inflation and trade data contributed to positive market sentiments.

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The Indonesian rupiah exchange rate depreciated slightly on Thursday (03/07). The US dollar gained as markets reacted to Wednesday’s ADP nonfarm payrolls report which showed that 281,000 jobs were added in the US private sector in June 2014, thus exceeding expectations. Furthermore, the market is optimistic that US employment data, released later today, will be positive too. According to the Bloomberg Dollar Index, the currency of Indonesia depreciated 0.04 percent to IDR 11,918 per US dollar.

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Although the benchmark stock index of Indonesia (known as Jakarta Composite Index or IHSG) was in the red zone prior to the release of Indonesia’s June inflation figure and May trade data, at the end of the day it finished slightly in the green zone. The IHSG climbed 0.13 percent to 4,884.83 points. The macroeconomic data that were released were positive and made market participants engage in stock trading. Moreover, the index was supported by Asian stock markets that were mostly up as well as the appreciating rupiah exchange rate.

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Despite Hong Kong’s falling Hang Seng Index (HSI), the benchmark stock index of Indonesia (known as the Jakarta Composite Index or IHSG) managed to climb 0.69 percent to 4,878.58 points on Monday (30/06). A number of reasons can be cited that positively influenced the performance of the IHSG. These are higher US Michigan Consumer Sentiment, positive forecasts for tomorrow’s release of June inflation and the May trade balance of Indonesia, declining global oil prices and the appreciating Indonesian rupiah exchange rate.

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The Indonesian rupiah exchange rate is appreciating sharply on Monday (30/06). By 15:13pm local Jakarta time, the currency of Indonesia had strengthened 1.31 percent to IDR 11,838 against the US dollar. Main factors that cause this performance are the weakening US dollar (as a slowdown in the US economic recovery evokes expectations that the Fed Rate will not be raised soon) and falling oil prices; the US benchmark West Texas Intermediate declined 30 cents to USD $105.44 in mid-morning trade while Brent crude fell 22 cents to USD $113.08.

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Although the Indonesian rupiah exchange rate appreciated 0.86 percent to IDR 11,995 per US dollar on Friday (27/06) as economic data from China, South Korea and Taiwan sparked optimism that regional growth has picked up, the recent depreciating trend of Indonesia’s currency burdens the country’s manufacturing industry. This industry is still dependent on imports of raw materials, capital goods and auxiliary materials, which are paid using US dollars causing the domestic industry to feel the financial impact of a weaker rupiah.

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