Contrary to the performance of most other Asian stock indices, Indonesia’s benchmark Jakarta Composite Index fell 0.52 percent to 4,959.25 points on Monday (22/06). Other Asian markets were supported by renewed hopes of averting a Greek exit (Grexit) from the Eurozone after the debt-ridden country gave new proposals to its creditors in the Eurozone over the past weekend. According to the Greek government these proposals are mutually beneficial. Ahead of the ‘emergency’ meeting today, the euro and European stocks tend to rise heavily.

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Indonesian stocks rebounded on Tuesday (16/06). The country’s benchmark Jakarta Composite Index rose 0.72 percent to 4,872.60 points supported by foreign net buying and rebounding from yesterday’s 13-month low position. Middle and longer term investors now have great opportunity to find stocks at bargain prices (particularly those stocks that are not too exposed to the weakening rupiah). However, trading volume was low at about 60 percent of the past 30-day average thus indicating that market participants remain wary.

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The central bank of Indonesia (Bank Indonesia) is expected to leave its interest rate regime unchanged at Thursday’s Board of Governor’s meeting. Currently, Bank Indonesia’s key interest rate (BI rate) stands at 7.50 percent, the overnight deposit facility at 5.50 percent, and the lending facility rate at 8.00 percent. The central bank seems committed to this relatively high interest rate environment as the country’s inflation accelerated to 7.15 percent (y/y) in May, while the rupiah touched a 17-year low on 9 June 2015.

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In line with the performance of most other stock indices in Asia today (15/06), Indonesia’s benchmark Jakarta Composite Index (IHSG) fell over one percent in the first trading session. Primary reasons for this weak performance are concerns about stalled negotiations between Greece and its Eurozone creditors. Negotiations broke down without a deal on the bailout aid causing raising worries about a Greek default on its debt (a payment is due at the end of this month) as well as a Greek exit from the Eurozone (“Grexit”).

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Immediately after the opening of trade on Wednesday (10/06), Indonesian stocks rebounded sharply. Yesterday, Indonesia’s benchmark stock index (Jakarta Composite Index) had fallen 2.30 percent due to worries about looming higher US interest rates later this year, the Greek debt crisis in the Eurozone, heavy rupiah depreciation, and weak domestic macroeconomic data (such as Indonesia’s high inflation, disappointing Q1-2015 economic growth, the still wide current account deficit, and the central bank’s falling forex reserves).

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Indonesian stocks declined more than expected during the first trading session on Tuesday (09/06). The benchmark Jakarta Composite Index plunged 3.12 percent to 4,858.31 points amid heightened expectation of a US interest rate hike as well as worries about the Greek debt situation in the Eurozone. The performance of other Asian stock indices was mixed on Tuesday morning with Shanghai, Singapore and South Korea showing modest gains, while New Zealand, Hong Kong, Malaysia and Taiwan were down marginally.

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Indonesia's central bank (Bank Indonesia) is well aware of the continuation of the "currency war" as a side-effect of further monetary tightening in the USA. Bank Indonesia Governor Agus Martowardojo said on Monday (08/06), quoted by state news agency Antara, that he sees a currency war continuing over the next three years provided that the Federal Reserve starts to tighten its monetary approach gradually. Markets expect the Fed to raise US interest rates in September 2015.

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Indonesian stocks and the rupiah are experiencing severe pressures at the start of the new trading week. Indonesia’s benchmark stock index (Jakarta Composite Index) declined 1.68 percent to 5,014.99 points (a seven-month low), while the rupiah depreciated 0.71 percent to IDR 13,385 per US dollar according to the Bloomberg Dollar Index on Monday (08/06). As such, the rupiah extended its record-low closing in the post Asian Financial Crisis era. Indonesian stocks and the rupiah are the worst performing Asian assets.

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The Indonesian rupiah continues to be a cause for concern as the currency immediately depreciated heavily after trading opened on Monday (08/06). Based on the Bloomberg Dollar Index, the rupiah hit a new record-low of IDR 13,382 per US dollar in the post Asian Financial Crisis era at 9:10 am. Due to a lack of domestic and international positive sentiments only central bank intervention can support the country's ailing currency. Meanwhile, Indonesian stocks followed suit by declining 0.70 percent shortly after opening.

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The Indonesian rupiah continued to set a new record-low in the post Asian Financial Crisis era. Based on the Bloomberg Dollar Index, the rupiah depreciated 0.07 percent to IDR 13,290 per US dollar on Friday (05/06), the weakest level since 1998. A number of factors are responsible for this weak performance. These include higher bond yields, US dollar demand due to dividend repatriation and debt repayment, Indonesia’s high inflation, uncertainty about the Greek debt crisis and looming higher US interest rates.

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The Indonesian rupiah exchange rate depreciated in August 2019. The currency started the month at the level of IDR 14,026 per US dollar, but ended the month at IDR 14,237 per US dollar (data taken from Bank Indonesia’s benchmark Jisdor rate). In other words, the rupiah weakened 1.50 percent against greenback in August 2019.

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The Indonesian rupiah rate weakened against the US dollar in March 2019. Bank Indonesia’s benchmark JISDOR rate finished the third month of the year at a position of IDR 14,244 per US dollar, down 1.29 percent compared to the level of IDR 14,062 per US dollar that was set at the last trading day of February 2019. Nevertheless, compared to the start of the year, the rupiah has remained in positive territory, having appreciated 1.64 percent against the US greenback in the first quarter of 2019.

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In line with expectations, the central bank of Indonesia (Bank Indonesia) kept its benchmark BI 7-Day Reverse Repo Rate at 6.00 percent at the February policy meeting that was held on 20-21 February 2019. Also the deposit facility and lending facility rates were kept at 5.25 percent and 6.75 percent, respectively.

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The Indonesian rupiah appreciated markedly in January 2019, and reached its strongest level since the end of June last year. The benchmark JISDOR rate of Bank Indonesia ended the first month of 2019 at IDR 14,072 per US dollar, strengthening from the level of IDR 14,481 per US dollar at the last trading day of 2018. Or, in other words, the rupiah managed to appreciate 2.82 percent against the greenback in the first month of 2019.

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In line with expectations, the central bank of Indonesia (Bank Indonesia) left its interest rates unchanged at the last monetary policy meeting of 2018 (held on 19-20 December 2018). The benchmark BI 7-Day Reverse Repo Rate was held at 6.00 percent, while the deposit facility and lending facility rates were kept at 5.25 percent and 6.75 percent, respectively.

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Robust rupiah appreciation in the month of November 2018 has taken many people – such as policymakers, businessmen, and analysts, including us – by surprise.

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It are challenging times for businessmen and investors in Indonesia. An escalating trade war between the United States and China is felt by emerging markets including Indonesia. For example, the rupiah has weakened to a 20-year low against the US dollar. Meanwhile, Indonesia's legislative and presidential elections are scheduled for April 2019 and the results can have big consequences for the country's investment climate.

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Based on the latest reports - and contrary to earlier plans - the Indonesian government will not postpone the development of 15,200 MW of power projects. Earlier the government said it wanted to delay various power projects in an effort to curtail imports, thus improve the country's current account balance and ease heavy pressures on the rupiah exchange rate.

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Concerns about Indonesia's current account balance increased after Bank Indonesia announced last week that the country's current account deficit widened to USD $8.02 billion, or 3.0 percent of gross domestic product (GDP), in the second quarter of 2018. It is Indonesia's highest quarterly deficit since Q3-2014, thus putting additional pressures on the rupiah exchange rate.

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There are doubts whether Indonesia's gross domestic product (GDP) growth can reach 5.2 percent year-on-year (y/y) in full-year 2018 as Indonesia is experiencing a couple of major challenges. Challenges include the global trade war, the fragile rupiah, Bank Indonesia's higher benchmark interest rate, the current account deficit, and political tensions ahead of the 2019 legislative and presidential elections. Currently, Indonesia Investments' forecast for Indonesia's economic growth is set at 5.2 percent (y/y) in 2018.

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