On 4 May 2014, 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 in the last seven days. Most of the topics involve economic topics such as macroeconomic assumptions of the Indonesian government, April inflation, the March trade balance, April manufacturing, an update on the rupiah, the 2014 presidential election, and more.

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On Wednesday morning (30/04), the Indonesian rupiah exchange rate had appreciated 0.11 percent to IDR 11,536 per US dollar based on the Bloomberg Dollar Index at 9:15 local Jakarta time. On Tuesday (29/04), Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) depreciated 0.18 percent to IDR 11,589 against the US dollar. Today's JISDOR will be released by the central bank of Indonesia around noon local Jakarta time.

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Based on the Bloomberg Dollar Index, the Indonesian rupiah exchange rate appreciated 0.23 percent to IDR 11,603 per US dollar on Thursday (24/04). The currency's performance was particularly influenced by weak new US single-family homes sales. These sales fell more than expected and hit a five-month low in February 2014, implying that there is continued weakness in the US housing market. Meanwhile, US durable goods orders and US initial jobless claims, which will be released later today, are expected to be weak too.

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The Indonesian rupiah exchange rate continued its recent weakening trend on Wednesday (23/04). Based on the Bloomberg Dollar Index, Indonesia's currency had depreciated 1.12 percent to IDR 11,650 per US dollar at 12:45 local Jakarta time, its weakest level in two months. Reasons for this poor performance are weak Chinese manufacturing data, renewed concerns about Indonesia's wide current account deficit and ongoing political uncertainty after the fragmented outcome of Indonesia's 2014 parliamentary election.

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The International Monetary Fund (IMF) praised the Indonesian government's policy approach to safeguard the country's financial stability amid external shocks in 2013 and hopes that the new government, which will be inaugurated in October 2014, continues the economic reform agenda. Changyong Rhee, Director of the IMF's Asia Pacific Department, said that Indonesia - Southeast Asia's largest economy - is currently on the right track and forecast to grow 5.4 percent in 2014, slightly lower than the 5.78 percentage growth in 2013.

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Car and motorcycle sales increased rapidly in Indonesia throughout March 2014, primarily due to an improved distribution network. In the previous months, heavy rains amid a peak of the rainy season (causing floods in various parts of Indonesia) resulted in the postponement of car and motorcycle purchases. Data from the Association of Indonesian Automotive Industries (Gaikindo) indicated that car sales surged 18 percent (year-on-year, yoy) to 113,277 units in March 2014, while motorcycle sales grew 9.2 percent (yoy) to 728,820 units.

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Investors were not happy to see the parliamentary election result of Indonesia on Wednesday (09/04). The fragmented outcome implies continued political uncertainty toward the July 2014 presidential election. None of the Indonesian political parties were able to secure a majority in the legislative election, meaning it will be more difficult to pursue a clear and steady political course over the next five years. The PDI-P, which was forecast to secure an impressive victory on the 'Jokowi effect', was unable to record a large victory.

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Most emerging currencies in Asia appreciated against the US dollar on Monday (07/04) as the 192,000 jobs that were added by US employers in March 2014 are believed to be too low to trigger an early interest rate hike by the US Federal Reserve. The new jobs data did not meet expectation, particularly after the strong US private jobs report. Meanwhile, trading in Asia was subdued as China's financial markets were closed (due to the Qingming Festival also known as Tomb Sweeping Day).

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The Indonesian rupiah exchange rate moved rather sideways on Friday (04/04). Based on the Bloomberg Dollar Index, the currency appreciated 0.06 percent to IDR 11,316 per US dollar. Most emerging Asian currencies tended to depreciate against the greenback as the market is waiting for US unemployment data, released later today. Overall, market participants remain confident in Indonesia's economic fundamentals as inflation eased to 7.32 percent (yoy) in March, while the country posted a trade surplus of USD $785 million in February.

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The Indonesian rupiah exchange rate depreciated 0.25 percent to IDR 11,323 per US dollar on Thursday (03/04) according to the Bloomberg Dollar Index. Analysts Rangga Cipta (Samuel Sekuritas Indonesia) and Zulfirman Basir (Monex Investindo Futures) expect the rupiah to move sideways or weaken toward the end of the week as the market is waiting for various data, including the meeting of the European Central Bank regarding its interest rate (03/04), US unemployment, US nonfarm payrolls and US ISM Non-Manufacturing PMI.

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Broad market trends in the Indonesian rupiah have held relatively consistent over the last year, with a modest devaluation seen against the US dollar. We did see fluctuations in these trends during the summer months but many of these moves came as a result of external influences. One of the best examples here is the media turmoil that posted during this period with respect to a slowdown in the Chinese economy, and this has left many investors wondering whether the rupiah will be able to stand on its own merits and reverse some of its earlier weakness.

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New York-based financial services firm Standard & Poor's stated that Indonesia's banking industry will feel the negative impact of Indonesia's sluggish economic growth in combination with persistently low commodity prices next year. This combination may weaken profitability of the nation's banking industry. S&P puts Indonesia's economic growth in 2016 at 5 percent (y/y), below the International Monetary Fund's and World Bank's forecast as well as the central government's target, all at 5.3 percent (y/y).

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The financial markets have had an interesting year in 2015, with several significant surprises seen in the major asset classes. On the whole, 2015 could probably be best described as a year of stabilizing with stocks and commodities holding mostly steady throughout the period. This has been largely true in the currency markets, as well. But there are some factors that are likely to influence trends for world currencies in new ways in 2016. Central banks in some regions will likely have significant influence in others, and investors will need to remain aware of the possibilities early in order to position for potential trend chances in critical areas.

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Ace Hardware Indonesia, one of Indonesia's leading retail companies that is engaged in the markets of home improvement and lifestyle products, is expected to show modest (single-digit) growth in 2016. Same store sales growth is estimated to grow in the range of 8-10 percent year-on-year (y/y). This modest performance is caused by weak purchasing power in Indonesia amid sluggish economic growth and due to the fragile rupiah (against the US dollar).

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The structure of Indonesia's automotive industry remains weak as it is too dependent on imports of raw materials, making sales prices of cars highly vulnerable to the volatile Indonesian rupiah. The automotive industry has been one of the many local industries that has been plagued by Indonesia's economic slowdown and fragile rupiah (amid looming tighter monetary policy in the USA) as people's purchasing power has weakened. In the first ten months of 2015, Indonesian car sales stood at a total of 853,008 units, down 18 percent from car sales in the same period last year.

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Indonesian assets weakened on Friday (06/11) on expectation that US non-farm payrolls and US employment data would improve, suggesting that a Fed Fund Rate hike may occur in December 2015. Such expectations were correct. After Indonesian and other Asian markets had closed on Friday, the US Labor Department announced that October payrolls rose 271,000 (the largest increase this year), while the US unemployment rate touched a seven-year low at 5 percent. Furthermore, the average hourly earnings over the past 12 months climbed by the most since 2009.

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As Indonesia's inflation rate has eased to 6.25 percent (y/y) in October 2015 from 6.83 percent (y/y) in the previous month, and given that Indonesian inflation will ease more markedly in the last two months of 2015 as the impact of the subsidized fuel price hike in November 2014 will vanish, the central bank of Indonesia (Bank Indonesia) seems to have more scope to cut its current relatively high benchmark interest rate, hence giving rise to accelerated economic activity.

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Today (22/10), the World Bank released the October 2015 edition of its flagship Indonesia Economic Quarterly, titled "In Times of Global Volatility". In the report the World Bank states that despite current ongoing global uncertainties (caused by looming monetary tightening in the USA and China's economic slowdown), which make macroeconomic management difficult in the year ahead, pro-active government action could offset the negative impact and may help to boost growth.

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American financial services company Standard & Poor's warns that defaults by Indonesian companies are a serious threat over the next 18 months given their eroded balance sheets amid the country's current economic slowdown. The warning came after Indonesian mobile phone retailer Trikomsel Oke announced plans to restructure about USD $155 million worth of debt as it may not be capable to meet obligations indefinitely.

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Both Morgan Stanley and Moody's Investors Service have cast some negative perceptions on the condition of the Indonesian economy. First, American multinational financial services corporation Morgan Stanley released a report in which it stated that the recent rupiah rally will not last (Morgan Stanley maintains its year-end target of IDR 14,000 per US dollar). Then, global credit ratings agency Moody's criticized Indonesia's recently unveiled third policy package in which the government lowers energy prices for local manufacturers in a bid to support the industry.

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