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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Indonesian assets are leading declines in Asia on Wednesday's trading day (05/10) as (global) markets are digesting the latest reports that the European Central Bank (ECB) may withdraw its bond buying program, while statements from US Federal Reserve officials strengthened the case for a Fed Funds Rate hike before the year-end. Lastly, the International Monetary Fund (IMF) cut its forecast for US economic growth in 2016 to 1.6 percent (y/y) from its earlier estimate of 2.2 percent (y/y).

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After the US Federal Reserve decided to leave its interest rates unchanged at the September policy meeting on Wednesday (21/09) Asian stocks surged while emerging market currencies appreciated against the US dollar. Indonesia's benchmark Jakarta Composite Index had surged 1 percent by 11:30 am local Jakarta time, while the Indonesian rupiah had appreciated 0.38 percent to IDR 13,087 per US dollar (Bloomberg Dollar Index). A delay in US monetary tightening makes the higher yielding (but riskier) emerging markets assets an attractive alternative.

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In line with the performance of US stocks overnight, Asian stocks plunged to a six-week low on Wednesday morning (14/09), while Asian currencies are under similar pressure. Investors have become increasingly concerned about weaker-than-estimated growth, while confidence in central banks' efforts to boost economies fades. Meanwhile, there remains a high degree of uncertainty about a looming interest rate hike in the United States. In Asia losses were extended as higher bond yields and excessive volatility encourage investors to unwind positions.

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Those who invest in Indonesian stocks and the rupiah may prefer to remain in 'wait and see'-mode ahead of the US Federal Reserve's September two-day policy meeting (20-21 September). In the new trading week markets are again plagued by a very high degree of volatility due to changing perceptions regarding the Fed Funds Rate hike. On Monday (12/09), when Indonesian markets were closed for a public holiday, Asia experienced a major selloff, following Wall Street last Friday when US stocks plunged on fears of a looming (sooner-than-later) Fed rate hike.

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The Indonesia Stock Exchange (IDX) expects to see 15 more companies conducting an initial public offering (IPO) on the local bourse in the remainder of the year, supported by the improving macroeconomic indicators of Indonesia (including a 5.18 percent y/y GDP growth pace in Q2-2016, 2.78 percent y/y inflation in August, and the central bank's lower interest rates) as well as the tax amnesty program (that should bring home trillions of rupiah, part of which finds its way into the local stock market). However, looming tighter monetary policy in the USA remains a challenge.

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As expected, emerging markets in Asia, including Indonesia, were negatively affected by the speech of Federal Reserve Chair Janet Yellen in Jackson Hole last week. Her speech - touching the topics of solid new jobs creation - provided ammunition for analysts and investors to raise speculation about a near-term US Fed Funds Rate hike. Indonesia's benchmark Jakarta Composite Index fell 1.25 percent to 5,370.76 points, while the Indonesian rupiah depreciated 0.42 percent to IDR 13,267 per US dollar (Bloomberg Dollar Index).

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After the speech of Federal Reserve Chair Janet Yellen at an annual meeting of central bankers in Jackson Hole (Wyoming) on Friday (26/08), speculation about a looming Fed Funds Rate hike has risen. In her speech Yellen said the case for higher US interest rates has strengthened in recent months due to the nation's economic growth and stronger jobs market. Meanwhile, Federal Reserve Vice Chairman Stanley Fischer said a US interest rate hike could come as early as September 2016.

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Most Asian stocks slid on Monday (22/08) as there occurred renewed speculation about a Fed Funds Rate hike in September 2016 after hawkish statements from Federal Reserve officials, while crude oil prices fell nearly 2 percent in Asian trade after Iraq indicated that it seeks to boost exports, hence effectively snapping a seven-day winning streak. However, Indonesia's benchmark Jakarta Composite Index (IHSG) was up 0.21 percent to 5,427.17 points on the first trading day of the new week.

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After six years of steady decline, the Indonesian rupiah is likely to have appreciated against the US dollar at the end of 2016. So far this year, the currency of Indonesia has appreciated 4.8 percent to IDR 13,126 against the greenback (Bloomberg Dollar Index) supported by capital inflows, particularly into government bonds and stocks as well as the delay in further monetary tightening in the USA. Although the rupiah should depreciate a bit as we go towards the end of the year, it is set to finish the year at a stronger level than it started.

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On Wednesday (19/06), Indonesia's main stock index (IHSG) posted a 0.70 percent fall to the level of 4,806.66 points as foreign investors continued to sell more Indonesian stocks than they bought. Moreover, the IHSG did not receive any support from the Asian region, where most stock indices weakened. Similar to Europe and the United States, Asian markets were eagerly waiting for results of the meeting of the Federal Reserve on Wednesday evening and thus mostly refrained from trading during the day.

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Despite weakening stock indices in the United States on Friday (14/06), most Asian indices were up on Monday (17/06) and impacted positively on the main index of Indonesia (IHSG). On the other hand, market participants are still waiting for the outcome of the plenary session of Indonesia's House of Representatives (DPR) regarding the approval of the increase in the price of subsidized fuel. The market is speculating that the price increase will be approved even though a number of political parties oppose the plan.

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Indonesia's main stock index (IHSG) moved wildly last week. During the first two days of the week, the index fell to 4,609.95 points, which is considerably below its record high level of 5,214 on 20 May 2013. However, on the last trading day of the week (14/06), a 3.32 percent recovery occurred. Generally, it were domestic market participants that supported the IHSG. Foreign market participants continued to sell parts of their Indonesian stock portfolios. Total foreign selling totaled IDR 9 trillion (USD $910.4 million) last week.

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On Friday (14/06), the main stock index of Indonesia (IHSG) jumped 3.32 percent to 4,760.74 points as financial market participants were optimistic about the effects of the higher central bank interest rate that was announced the day before. Moreover, Indonesia's IHSG was supported by a green wave across Asian stock markets, which was partly due to a strong rebound in markets in the United States on Thursday (13/06). Stocks in Indonesia's banking and property sectors were the top-gainers on Friday's trading day.

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On Thursday (13/06), Indonesia's main stock index (IHSG) could not continue the recovery it had shown on the previous day. The index fell 1.92% to 4,607.66 points amid international and domestic concerns. Investors are worried about central banks' policies and the World Bank's downgrade of global economic growth in 2013. On the domestic side, negative sentiments were brought on by the fuel subsidy issue (and its inflationary impact), the weakening rupiah, the BI rate hike, falling foreign exchange reserves, and the trade deficit.

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Despite continued foreign selling of Indonesian stocks on today's trading day (12/06), we see that there is an end in sight to the sell of. During the last three days, Indonesia's main index (IHSG) had fallen considerably. The fall was led by the big cap companies that generally are target of most foreign investment. As stock prices of these companies had experienced a free fall in previous days, it made them attractive for limited buying. However, negative sentiments that have coloured the stock market recently, have not waned yet.

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Indonesia's main stock index (IHSG) was mixed on Tuesday's trading day (04/06) as negative market sentiments were still felt after yesterday's tumble (inflicted by Indonesia's April trade deficit). Foreigners continued to sell parts of their Indonesian stock portfolios causing the index to fall below the psychological boundary of 5,000 points, which also meant that it went into oversold territory. But the rise of the Yen, thus supporting Asian indices, in combination with positive openings in Europe made the IHSG rise in the end.

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On the very last trading day of May (31/05), Indonesia's main stock index (IHSG) closed at 5,068.63 points. During the month, the index showed a volatile performance as it reached its peak at 5,251.29 and its low at 4,907.59 points. Overall, the IHSG continued to rise in May despite various negative sentiments. Foreign investors recorded a net sell of IDR 7.9 trillion (USD $806.12 million). However, optimistic domestic investors kept Indonesia's index in the green zone.

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The weak stock indices in Europe and USA at the end of last week had a negative impact on stock indices in Asia on Monday (27/05/13), including Indonesia's main stock index (IHSG). Investors rushed to reduce their stock portfolios, which resulted in an 1.36 percent fall to 5,085.14 points. At the end of last week, the IHSG had formed a green candlestick but today there were no continued positive signals as the market lacked positive sentiments. But a number of rising Asian indices and the positive openings of European stock indices managed to support the IHSG a bit.

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American stock indices that refrained from staying in the green zone at the end of Monday's trading session (20/05/13) made market participants less enthusiastic to invest in Asian stocks. Indonesia's main stock index (IHSG) was one of the indices that felt this impact as a lack of positive sentiments blocked it from rising to another record high level. Investors were also concerned about profit taking because the index had reached the overbought level. When European indices opened weak on Tuesday it increased downward pressures on the IHSG.

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