Indonesia's central bank (Bank Indonesia) expects the Indonesian economy to grow between 6.3 and 6.8 percent in 2013, supported by strong domestic consumption and foreign investment, with inflation rising by about 4.5 percent. Indonesian exports are expected to increase due to better global demand for Indonesia's commodities such as coal and palm oil, with commodity prices rising accordingly. But some problems in Indonesia's financial system remain to be solved.

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Bank Indonesia, the country's central bank, continued its key interest rate at the level of 5.75 percent. The interest rate has been at this historic low level for the 12th month in a row. The current policy rate is "considered consistent with the contained inflationary pressure in accordance with its target range of 4.5 percent ± 1 percent in 2013 and 2014," according to the website of Indonesia's central bank.

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Bank Indonesia's foreign exchange reserves have fallen by US $4 billion to US $108.8 in January from US $112.8 in December 2012. The current reserves translate to six months of imports and short-term government debt payments. Reasons behind the four percent decline are massive spending by Indonesia's Central Bank to support the weakening IDR rupiah in combination with overseas debt payments.

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Today, Statistics Indonesia (BPS), a non-departmental government institute, stated that the inflation rate of January increased due to the government's decision to raise electricity tariffs and due to massive floods in Jakarta and other cities. January's headline inflation is 1.03 percent. The year-on-year inflation rate now stands at 4.57 percent; still within Indonesia's Central Bank's target of 4.5 ±1 percent.

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Various reasons explain why Indonesia's main stock index (IHSG) managed to reach another record high on Monday (20/05/13) at 5,214.98 points, an 1.35 percent gain. Foreigners were back chasing Indonesian stocks (particularly blue chips), Asian indices were up (led by Hong Kong's Hang Seng Index), the listing of Bank Nationalnobu (NOBU) which gained 14.67 percent on its first trading day, positive European openings, and the positive response towards Indonesia's new Finance minister, Chatib Basri, regarded as an independent policy maker.

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The pace of the upward movement of Indonesia's main stock index (IHSG) was beyond expectation. While American and European stock indices were weak on Thursday (16/05/13) and Hong Kong's HSI as well as South Korea's KOSPI were closed due to holidays, it did not bring a negative impact on the IHSG. Particularly consumer and coal miner stocks supported the IHSG's rise. At the end of Friday's trading day (17/05/13), the IHSG hit a new record high level: 5,154.68 points, an 1.32 percent increase.

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Positive American and European stock indices on Tuesday (14/05/13) made a good impact on Asian stock indices on Wednesday (15/05/13), including Indonesia's main index (IHSG) which is heading towards the 5,100 points line. Although many foreign investors were eager to sell their Indonesian assets, support from other Asian stock indices kept the IHSG within the green zone. At the end of the trading day, it stood at 5,089.88 points, a 0.16 percent rise.

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On Tuesday (14/05/13), Indonesia's main stock index (IHSG) rose supported by positive Asian stock indices in the first trading session. But this pillar of support did not last for long as the Asian stock indices weakened afterwards, which impacted on the performance of the IHSG. Pressures of profit taking remained as the IHSG is still near its record high level but foreign investors - being net buyers of Indonesian stocks - helped to offset profit taking, resulting in a 0.54 percent gain to 5,081.94 points.

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After setting a new record last Friday, Indonesia's main stock index (IHSG) lost its strength on Monday (13/05/13). A number of factors were behind the decline. Foreign investors mostly sold their Indonesian assets as the record high level of the IHSG made it tempting to engage in profit taking. Moreover, the still unclear policy regarding Indonesia's subsidized fuel causes uncertainties. Lastly, Asian stock indices were mixed while European indices opened lower on Monday.

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Indonesia's main stock index (IHSG) returned to where it belonged: above the level of 5,000 points. Apparently Moody's threat to downgrade Indonesia's credit rating, as has been done by Standard & Poor's a few days ago, did not leave a big impression on market participants. As a result, the IHSG rose 1.02 percent to 5,042.79 and thus almost repaired the damage done at the end of last week. Other Asian stock indices as well as positive openings in Europe also provided good support today.

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The upward movements of both American and European stock indices on Friday (03/05/13) provided good support for today's performances of indices in Asia, including the Indonesia Stock Index (IHSG). After having been hit hard for two consecutive trading day's, the IHSG rebounded despite foreign investors still selling off their Indonesian stocks. Others, however, use this momentum to hunt for stocks that are now considered cheap after last week's fall.

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International financial services company Standard & Poor's (S&P) downgraded its outlook on Indonesia’s BB+ rating from positive to stable as the agency assessed that Indonesia's reform momentum is fading and the external profile is weakening. The decision came as a surprise as Indonesia's government had just declared to reduce its massive spending on fuel subsidies starting from next month. These subsidies were the main reason why S&P had not upgraded Indonesia's credit rating to investment grade yet.

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The Indonesia Stock Index (IHSG) fell victim to large profit taking on Thursday's trading day (02/05/13) after having set a new record yesterday. Market players are probably concerned about the 'May Cycle' which refers to the traditional fall of the IHSG in the month of May. But negative market sentiments were particularly brought on by Standard & Poor’s revised outlook on Indonesia’s BB+ rating from positive to stable. It triggered a 1.32 percent correction in Indonesia's stock index.

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Even though American and European stock indices were positive on Monday (in fact S&P 500 set a new record) it did not impact directly on the performance of Indonesia's main stock index (IHSG) on Tuesday (30/04/13). In the first session, the IHSG's peak at 5,014 points was only short-lived and quickly lowered again. In the second session, however, the index started to show more solid growth (despite the ongoing uncertainty about Indonesia's subsidized fuel price) as Asian stock markets were mostly up.

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