Although challenges persist, Indonesia's benchmark stock index (Jakarta Composite Index) is estimated to rise in 2016, surpassing the level of 5,000 points. Last year the index fell 12.13 percent to close at 4,593.01 points. In particular Indonesia's infrastructure, banking, consumption, cement, property and construction sectors are expected to post a good performance this year on the back of accelerated domestic economic growth supported by government spending and the recent economic stimulus packages.

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The last trading day of 2015 on the Indonesia Stock Exchange has passed and now it is time to look back on the performance of Indonesia's benchmark stock index (Jakarta Composite Index) and the rupiah during 2015. The year 2015 was a hectic year, characterized by volatile behavior due to uncertainty about the timing of the looming US interest rate hike (which was finally decided upon by the Federal Reserve in December 2015) and the economic slowdown of China.

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The Indonesian rupiah continued its remarkable rally on Tuesday (22/12). The currency had appreciated 0.98 percent to IDR 13,672 per US dollar by 11:10 am local Jakarta time (Bloomberg Dollar Index). The rupiah has recovered from a recent low of IDR 14,123 on Monday 14 December to IDR 13,672 per US dollar, a 3.2 percentage point advance in about one week. There are several matters that explain this remarkable performance.

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The Indonesian rupiah is strengthening remarkably against the US dollar on Monday (21/12) despite expectation that the rupiah will become the worst-performing Asian currency in 2016 on capital outflows (amid more US interest rate hikes planned for 2016), Indonesia's falling foreign exchange reserves, and persistent low commodity prices. Based on the Bloomberg Dollar Index the Indonesian rupiah had appreciated 1.13 percent to IDR 13,760 per US dollar by 14:20 pm local Jakarta time on Monday (21/12).

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On 20 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, Indonesia's interest rate environment, the trade balance, the country's energy mix, updates of the performance of listed companies, and more.

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Stock indices in Southeast Asia plunged on Friday (18/12), led by benchmark indices in Thailand and Indonesia. These Asian markets followed the global correction that occurred after investors weighed in the possible impact of the Federal Reserve's interest rate hike. US and European stocks dropped on Thursday and Friday, while prices of oil and other commodities continued to slide. Indonesia's Jakarta Composite Index fell 1.92 percent to 4,468.65 points.

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After the rally on Thursday (responding positively to the Federal Reserve's announcement to raise its Fed Fund Rate), Indonesian assets are weakening on Friday (18/12) while most other Asian markets are down. Indonesia's benchmark Jakarta Composite Index was down 1.20 percent to 4,501.34 points by 09:45 am local Jakarta time, while the Indonesian rupiah had depreciated 0.22 percent to IDR 14,040 per US dollar (Bloomberg Dollar Index). As such, Indonesian stocks are following the example of US stocks that plunged overnight.

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Bank Indonesia, the central bank of Southeast Asia's largest economy, kept its key interest rate (BI rate) at 7.50 percent at the December policy meeting on Thursday (17/12). Meanwhile, the overnight deposit rate facility (Fasbi) was left unchanged at 5.50 percent and the lending facility at 8.00 percent. It was the tenth consecutive month without changing the country's interest rate environment (in February 2015 the central bank cut the BI rate by 0.25 percent).

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Indonesian stocks and the rupiah responded highly positive to the decision of the US Federal Reserve to raise its key Fed Fund Rate by 25 basis points on Wednesday (16/12). Indonesia's benchmark stock index (Jakarta Composite Index) soared 1.62 percent to 4,555.96 points, while the rupiah appreciated 0.44 percent to IDR 14,009 per US dollar. Not only in Indonesia but also globally stocks thrived on the ending of prolonged uncertainty about the timing of the US interest rate hike.

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The US Federal Reserve finally decided to raise the Fed Fund Rate by 25 basis points at its December policy meeting (15-16 December) on a considerable improvement in US labor market conditions (the US unemployment rate having fallen to 5 percent) and US inflation projected to meet the Fed's 2 percent target over the medium term. After this announcement US stocks soared. Emerging markets were not hit by severe capital outflows after the rate hike. Asian stock indices strengthened sharply on Thursday morning (17/12).

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The Jakarta Composite Index (Indonesia's benchmark stock index, abbreviated IHSG) made a positive start on Monday (25/11). Investors were confident amid today's rising indices throughout Asia, brought on by the record breaking Dow Jones Index on Wall Street at the end of last week. However, this market optimism failed to provide a significant boost to the IHSG as the Indonesian rupiah exchange rate continued its downward spiral. The IHSG was up 0.39 percent to 4,334.80 points at the end of Monday's trading day.

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On the last day of the trading week (22/11), Indonesia's benchmark stock index (IHSG) fell 0.19 percent to 4,317.96 points thereby extending its losing streak to three days as investors remain concerned about the looming end - or at least winding down - of the Federal Reserve's monthly USD $85 billion bond buying program known as quantitative easing (QE3). Foreign investors recorded a net sell of IDR 38 billion (USD $3.3 million). The other indices in Asia were mixed. The Hang Seng and Nikkei were up but the Shanghai Composite was down.

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On Thursday's trading day (21/11/13), the Jakarta Composite Index (Indonesia's benchmark stock index, or IHSG) fell 0.56 percent to 4,326.21 points as investors are concerned seeing the result of the latest Federal Open Market Committee (FOMC) meeting, which seems to indicate that the Federal Reserve's monthly USD $85 billion bond-buying program (quantitative easing) will be wound down within a couple of months. The IHSG was also negatively affected by the lower preliminary HSBC Manufacturing PMI of China.

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The Federal Reserve, central banking system of the United States, expects that the current economic recovery of the USA is set to continue. In the minutes of the latest Federal Open Market Committee (FOMC) meeting, held at end-October 2013, it is mentioned that within the next few months the Federal Reserve can start winding down its monthly USD $85 billion stimulus program (known as quantitative easing). The next FOMC meeting, which will shed more light on the future of the bond-buying program, is scheduled for December 2013.

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Amid falling Asian stock indices, Indonesia's benchmark stock index (IHSG) went down 1.08 percent to 4,350.79 points on Wednesday's trading day (20/11). As has become an usual pattern, after one or two days of gain, market participants immediately engage in profit taking the following day. Investors reacted to the OECD's downgrade of its outlook for global economic growth (triggered by slowing growth in emerging markets) and to Indonesia's central bank's higher interest rate (which impacts negatively on the country's economic growth).

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The government of Indonesia will release two additional fiscal policy packages at the end of November or start of December that both aim to heal Indonesia's current account deficit. The two packages constitute follow ups of the policy package that was released in August 2013. Previously, deputy minister of Finance, Bambang Brodjonegoro, announced that an additional package would be released in October. However, it turned out that the government needed some more time to prepare the two additional packages.

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Various factors contributed to the 1.34 percent rise of Indonesia's benchmark stock index (also known as the Jakarta Composite Index or the IHSG) on Monday (18/11) to 4,393.59 points. Firstly, the index was supported by other major Asian stock indices which all benefited from rising indices on Wall Street and in Europe at the end of last week. Secondly, the IHSG felt the positive impact from speculation that the government of China will reform its economy in order to spur economic growth.

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On Thursday 14 November 2013, Agus Martowardojo, Governor of Indonesia's central bank (Bank Indonesia), delivered his end-of-the-year speech at the Annual Bankers’ Dinner. The meeting was attended by leaders from Indonesia's House of Representatives (DPR), economic ministers, leaders of the country's banking industry and business community, non-ministerial government agencies as well as a number of international institutions, thus representing a strategic forum in terms of the national economy.

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Indonesia's benchmark stock index (IHSG) was not able to continue its rebound. On Friday (15/11), the IHSG fell 0.73 percent to 4,335.45 points amid widespread profit taking. Foreign investors recorded net selling of IDR 193 billion (USD $16.9 million) on today's trading day. Moreover, investors are concerned about the impact of the higher interest rate of the central bank (7.50 percent), particularly on the property and banking sectors in the fourth quarter of 2013.

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Despite rising concerns about the slowing pace of the Indonesian economy, the deputy minister of Finance Bambang Brodjonegoro reminded investors that Indonesia's economic growth in the third quarter of 2013 still constitutes one of the highest growth rates around the globe. Economic expansion in Q3-2013 slid to 5.6% in Southeast Asia's largest economy. With the exception of China (7.8% GDP growth in Q3-2013), Indonesia's growth continues to outpace growth in other emerging markets, such as Brazil (3.3%) and Turkey (4%).

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