JAKARTA (TheInsiderStories) – Good morning. It is fortunate that the United States (US) employment data was released on the weekend in Indonesian time as it gave market participants to digest the information.
At first glimpse, the US employment data was very positive with the unemployment rate in September at the world’s largest economy fell to 3.7 percent, the lowest level since December 1969. However, the number of jobs created only reached 134,000 by the end of September.
The Rupiah suffered from heavy lost last week due to consecutive remarks by officials of the US Federal Reserve giving rosy outlook on the state of the US economy. The remarks pushed yields on the 10-year US treasury and triggered capital outflow from emerging economies like Indonesia.
The Rupiah recorded five consecutive days of loss last week, ending at 15,182 per US$1 on Friday, according to Bank Indonesia’s reference rate.
While, the Jakarta Composite Index ended at 5,732 on Friday, capping the week with a 4.1 per cent loss. Foreign investors pulled out Rp2.4 trillion from the equity market last week.
Another key external development came from China. The People’s Bank of China announced that reserves requirement ratio for banks will be lowered by 100 basis points, effective on Oct. 15. The policy relaxation will inject a net of US$109.2 billion to the Chinese economy with spillover effect could follow suit in other regional economies.
The reserve requirement ratio determines the amount of cash that a bank must put in the central bank. On the other hand, relaxing the reserve requirement ratio also sends a clue that the Chinese administration is starting to get worry about the impact from the ongoing trade war with the US.
Domestically, support to the local currency may come from the government’s bond auction on Tuesday (09/10). The government aimed to raise as much as Rp20 trillion (US$1.38 billion) from the auction of three bond series and two treasury bills.
Despite the recent market volatility in the financial market, Indonesian government bonds still managed to attract strong demand. The government raised the maximum amount and received bids amounting Rp51.5 trillion in the last bond auction on September 25.
Furthermore, the attention of the world will be shifted to Bali this week as the annual World Bank-International Monetary fund will start today in the tourist island.
Go to politic, the opposition, still licking their wounds from last week’s political blunder, has been attempting to frame the even as an unnecessary luxury for Indonesia. The attack, however, was largely a failure.
On the development from Palu, Central Sulawesi, which was ravaged by earthquake and tsunami, the government announced that the amount of foreign assistance received so far amounting to Rp220 billion.
The disaster mitigation agency said the number of fatalities now reached 1,763 people from the disaster. All key infrastructures like airport, electricity and fuel distribution had been reported to return to normal in Palu, helping to accelerate the relief efforts currently underway.
May you have a profitable day.
Written by TIS Intelligence Team