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15 April 2025 (closed)
Jakarta Composite Index (6,441.68) +73.17 +1.15%
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Indonesian stocks and the rupiah started strong on Wednesday (09/09). Immediately after opening the benchmark Jakarta Composite Index rose over one percent to 4,366 points, while the rupiah appreciated 0.25 percent to IDR 14,244 per US dollar (Bloomberg Dollar Index) as these assets were supported by positive global sentiments after there had occurred a rally in most global equity markets on Tuesday (08/09).
Concern about Indonesia’s financial stability has heightened as the country’s foreign debt (USD $304.3 billion), by far, exceeds the central bank’s foreign exchange reserves which stood at USD $105.3 billion in late August 2015. Meanwhile, the weak rupiah (having depreciated nearly 15 percent against the US dollar so far in 2015) adds significant pressure on Indonesia’s foreign debt position hence causing concern about a looming debt crisis.
Despite the hosting of the Gaikindo Indonesia International Auto Show 2015 (20-30 August 2015), Indonesian car sales continued to shrank in August due to people’s weaker purchasing power amid the country’s economic slowdown. In August a total of 90,077 cars were sold in Southeast Asia’s largest economy, down 6.9 percent from the same month last year, according to the latest data from the Indonesian Automotive Industry Association (Gaikindo).
Indonesia’s foreign exchange reserves fell to USD $105.3 billion in late August 2015 (from USD $107.6 billion in the preceding month) as the government used foreign exchange (forex) for external debt payments while the central bank (Bank Indonesia) used part of the forex to intervene in the currency market in an effort to support the ailing rupiah rate which has been under severe pressure amid looming further monetary tightening in the USA and concern about the hard landing of China’s economy.
Most Asian stock markets finished lower on Monday (07/09) on persistent concern about the hard landing of China’s economy and the (related) selloff on European and US markets that occurred at the end of last week. Meanwhile, most Asian currencies depreciated (against the US dollar) after a US jobs report (released last Friday) could make the Federal Reserve decide to raise short-term interest rates later this month. All in all, investor sentiment remains fragile.
Indonesian stocks and the rupiah had a bad start on Monday morning. By 09.35 am local Jakarta time, Indonesia’s benchmark Jakarta Composite Index had fallen 0.99 percent to 4,371.49 points, while the rupiah had depreciated by 0.45 percent to IDR 14,236 per US dollar (Bloomberg Dollar Index).
Indonesian stocks and the rupiah are slightly down on Friday afternoon (04/09). Similar to yesterday it is a relatively quiet trading today (possibly caused by closed markets in Shanghai hence curtailing the spread of severe volatility). By 15:20 pm local Jakarta time the benchmark Jakarta Composite Index was down 0.48 percent to 4,411.99 points while the Indonesian rupiah had depreciated 0.07 percent to IDR 14,180 per US dollar (based on the Bloomberg Dollar Index).
International credit rating agency Moody’s Investors Service stated that the healthy liquidity levels of Indonesian property developers are expected to be sufficient to offset the negative impact of the heavily depreciated rupiah. A weak rupiah is troublesome - and negative for the credit rating - as about two-thirds of property developers’ debt is US dollar-denominated, while their revenue is rupiah-denominated. Secondly, Moody's is positive about the government recent decision to offer tax holidays.
Global markets are again facing rough times after China’s manufacturing activity fell to a three-year low in July 2015, yet another sign that the world’s second-largest economy is slowing faster than earlier estimated (and this surely impacts negatively on the global economy). Concerns about China led to plunging stock indices from Japan to New York on Tuesday (01/09). Moreover, International Monetary Fund (IMF) Managing Director Christine Lagarde, who is on a visit in Indonesia, said the IMF may soon cut its forecast for global economic growth in 2015 again (from 3.3 percent currently).
In line with nearly all other Asian stock markets, Indonesia’s benchmark Jakarta Composite Index (IHSG) plunged 2.15 percent to 4,412.46 points on Tuesday (01/09). After Asian trade had closed European and US indices also plummeted severely. The main reason is today’s announcement that China’s manufacturing fell to a three-year low in August 2015, yet another sign that China’s economic growth is declining faster than estimated. The country’s manufacturing PMI dropped to 49.7 in August from 50.0 in July (a reading below 50.0 indicates contraction).
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On Thursday (22/08), Indonesia's main stock index (IHSG) was not able to continue the rebound that occurred yesterday when the country's biggest pension fund, Jamsostek, began buying blue-chip stocks in a move to support the ailing index. Indonesia's benchmark index has now lost about 20 percent since its record peak in May 2013. Today, it fell 1.11 percent to 4,171.41 points. Eight sectoral indices weakened, of which the top losers were construction (-5.78 percent), basic industry (-3.42 percent), and finance (-2.39 percent).
Concerns about Indonesia's weakening rupiah intensified on Wednesday (21/08) as the currency is now balancing on the psychological boundary of IDR 11,000 per US dollar. The rupiah continued its downward spiral today although its decline was limited due to the intervention of Indonesia's central bank (Bank Indonesia) that started selling US dollars again in an effort to support the rupiah. According to data compiled by Reuters, the rupiah has now fallen 10.7 percent this year.
On Tuesday (20/08), Indonesia's benchmark stock index (IHSG) continued its decline with its fourth consecutive day of losses. Amid major concerns about Indonesia's economic growth, high inflation, tighter monetary policy and current account deficit, the IHSG fell 3.21 percent to 4,174.98 points. It means that the index now stands about 21 percent lower than its record peak in May 2013. Foreign investors have been pulling money out of the Indonesian market. According to Bloomberg, about USD $255 million has been retracted in the last two days.
The government of Indonesia proposes to allocate IDR 336.24 trillion (USD $32.6 billion) for subsidy spending in the 2014 state budget draft: IDR 284.7 trillion (USD $27.6 billion) for energy subsidies and IDR 51.6 trillion (USD $5.0 billion) for non-energy subsidies. The proposed amount implies a 3.41 percent fall in total subsidy allocation compared to Indonesia's state budget in 2013. However, despite a reduction, subsidy expenditure is still large at 18.5 percent of total government spending (IDR 1,816.7 trillion).
Analysts expect that Indonesia's benchmark stock index (IHSG) will end mixed today (20/08) after yesterday's large plunge amid heavy market concerns. Yesterday, the index dropped 5.58 percent to 4,313.52 points, the lowest since October 2011. Indonesia posted a current account deficit in the second quarter of 2013, while Thailand entered into a recession. The MSCI Emerging Market index¹, which includes both countries, fell 1.4 percent to a six-week low. Below a short overview of factors that caused negative sentiments on Indonesia's market.
After two days of growth, Indonesia's main stock index (IHSG) became victim of profit taking on Thursday (15/08). Particularly domestic investors were eager to sell their Indonesian assets. Falling indices on Wall Street on Wednesday (14/08) in combination with global uncertainty about the end of the Federal Reserve's quantitative easing program made a negative impact on Asian stock indices, including the IHSG. Indonesia's central bank's decision to keep its benchmark interest rate at 6.50% was well-received by most investors.
The foreign exchange reserves of Indonesia keep on falling from its historical peak of USD $124.64 billion in August 2011 to USD $92.67 billion at the end of July 2013. This development seems to highlight long-standing weaknesses in Indonesia's sovereign's external finances, as credit agency Fitch Ratings detected on several occasions before. The republic of Indonesia is currently characterized by four deficits, to wit a current account deficit, a balance of payments deficit, a trade balance deficit and a fiscal deficit.
After Wall Street turned back into the green zone on Tuesday (13/08) and was accompanied by continued rising stock indices in Europe, it provided good support for Asian stock indices on Wednesday (14/08), including Indonesia's main stock index (IHSG). Indonesian mining commodities and plantation stocks fell but these losses were offset by rising big cap stocks (particularly finance stocks) and speculation that Indonesia's central bank will keep its benchmark interest rate (BI rate) at 6.50 percent.
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.
Indonesia’s inflation rate in July 2013 was significantly higher than analysts had previously estimated. The country’s July inflation figure accelerated to 3.29 percent. On year-on-year basis, it now stands at 8.61 percent, the highest inflation rate since many years. Particularly food commodity and transportation prices rose steeply. The main reason for Indonesia's high inflation is the reduction in fuel subsidies. In late June, the government increased the prices of subsidized fuels in order to relieve the ballooning budget deficit.
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