Indonesia's minister of Economy, Ir. M. Hatta Rajasa, stated that the government of Indonesia intends to realize economic growth of at least 6.2 percent in the second quarter of 2013 in order to remain on track for 6.3 percent growth for full year 2013. Although he reminded that it will take hard effort to realize this target, his message contained more optimism than Finance minister Chatib Basri's statement earlier this week who sees 6.0 percent of economic growth as the limit in Q2-2013.

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Indonesian newspaper Investor Daily reported that stocks at the Indonesia Stock Exchange are still relatively cheap compared to regional stock indices. Currently, the price to earnings ratio (P/E ratio) of Indonesia's main index is about 18. In contrast, South Korea's Kospi index amounts to 34, Japan's Nikkei 28, Taiwan's Taiex 23, and Philippines' PSE stands at 23 times earnings. As the Indonesian economy as well as its companies' profit figures are projected to grow, the P/E is expected to fall to 16 this year.

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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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In its most recent report, the Asian Development Bank (ADB) forecasts Indonesia to continue its robust economic growth. Last year, the economy of Indonesia expanded 6.23 percent, and according to the ADB this figure will rise to 6.4 percent in 2013 and 6.6 percent in 2014. However, since the start of April there have been some issues that are causing Indonesia's stock indices to go down. Although believed to be only temporary, it is worth taking a closer look.

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On Monday, the Dow Jones Index gained as corporate results of Q1-2013 are estimated to be good. This subsequently had a positive impact on Asian stock indices on Tuesday, including Indonesia's main index (IHSG). Moreover, positive news from both Australia and China were well-received as well as the higher metal price (reflected by Hong Kong's rising Hang Seng Index). Amid this positivity, investors took the opportunity to enlarge their stock portfolios.

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Last week Friday, American stock markets were not able to maintain a positive trend due to Nonfarm Payrolls that increased below expectation. Moreover, concerns about a spreading bird flu epidemic in China in combination with increased political tensions in Korea impacted on Monday's trading day (8 April 2013) of the Indonesia Stock Exchange (IHSG). The index had to absorb a sell-off, thus closing lower to 4,897.52, an 0.58 percent decline.

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The Indonesia Stock Exchange (IHSG) experienced a mixed week. At the start of the week, the index rose, but towards the end of the week it weakened, although ending in the green on Friday. Recently, the IHSG has hit record levels, and this makes market participants worried that the index might fall in case there emerge negative market sentiments. These concerns are what made the index turn away from the next psychological boundary: 5,000 points.

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On Thursday 4 April 2013, market players were hoping that the Indonesia Stock Exchange (IHSG) would climb beyond the psychological level of 5,000. However, the presence of negative market sentiments - and the overbought condition of the IHSG - were used as reasons to engage in profit taking. It consequently pushed down Indonesia's main financial market indicator to the level of 4,922.61, an 1.18 percent fall compared to Wednesday's trading day.

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Despite positive results of monthly US Factory Orders and Economic Optimism, it did not support Asian stock markets up to the end of Wednesday's trading day. The Indonesia Stock Exchange (IHSG), on the other hand, maintained its upward movement to reach 4,981.47, a 0.49 percent gain. Matters that supported the IHSG's performance to yet another new record high level, were well-received 2012 company reports as well as expected dividend payouts.

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Usually, news about inflation is not well-received by market participants. Particularly when inflation turns out to be higher than expected. This time, however, something interesting happened in Indonesia. Although the country's March inflation rate was high (5.90 percent year-on-year), it was not followed up by a negative response of market players. In fact, the inflation rate seems to have strengthened the Indonesia Stock Exchange (IHSG), which gained 0.40 percent on Tuesday.

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With a number of important global stock exchanges still closed due to Easter, it seemed that the Indonesia Stock Exchange (IHSG) lacked a reference point to which it could cling. It is also likely that market participants have already consumed most of the 2012 corporate company reports and are therefore not waiting for new data of listed companies. Moreover, today's announcement of the relative high inflation rate of March did not support the IHSG either.

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Yesterday, Statistics Indonesia (BPS), a non-departmental government institution, released Indonesia's export and import numbers of February 2013. Indonesia's imports reached US $15.32 billion, while its exports stood at US $14.99 billion. It has thus resulted in the continuation of a trade deficit (US $327.4 million). For Indonesia, which always reported trade surpluses until last year, it is a worrying scenario as the trade deficit and higher inflation put pressure on the IDR rupiah.

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Current Finance minister Agus Martowardojo is approved by Indonesia's Parliament (DPR) to replace Darmin Nasution as governor of Indonesia's central bank (Bank Indonesia) in May 2013. Martowardojo, who has been active in banking for over two decades and had a successful term as head of state-controlled Bank Mandiri, was finance minister since May 2010 after taking over from Sri Mulyani, who was pressured out of Indonesian politics.

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