Morning Briefing: Indonesia Financial Market Set For Turbulent Day

The Board of Transaction at Indonesia Stock Exchange - Photo by IDX

JAKARTA (TheInsiderStories) – Good morning. Indonesia’s financial market is set for a turbulent day as the United States (US) President Donald Trump made good of his promise of imposing punitive tariffs on more Chinese goods.

The billionaire President announced 10 percent tariff on Chinese imports worth US$200 billion to the US, saying the world’s second-largest economy had conducted ‘unfair policies and practices’ in its bilateral trade. The new tariff will take effect on September 24.

Trump had demanded China to lower its trade surplus with the US, which reached US$276 billion in 2017 and US$134 billion in the first six months this year.

As a retaliatory measure, China announced tariff hike for US goods worth $60 billion.

Cumulatively, the US administration had hike tariffs on $250 billion Chinese imports. From the side of China the amount is $110 billion so far.

Trump was undeterred, threatening with another bout of tariff hike for $267 billion worth of goods, which means effectively all China’s exports to the US will be charged with the punitive measure.

Furthermore, he also accused China of attempting to influence US midterm election, to be held in November, by including agricultural commodities in its retaliatory measure. Agricultural commodities are a key source of income in the so-called swing states in the US electoral process.

There is still a positive news. The hike was lower than the initial plan of 20 per cent. However, Trump’s announcement sent jitters through the financial markets, heightening risks of a full-blow tariff war between the world’s two largest economies. The US 10-year treasury yield rose above 3 per cent to the highest in five months while the Dow Jones was in retreat.

The Jakarta Composite Index fell 0.2 per cent to 5,812 with foreign investors net sold Rp197 billion worth of stocks. The Rupiah weakened from 14,859 per US$1 to 14,908 per US$1, dangerously close to the level of 15,000 per US$1.

The government announced more instruments to its attempts to reduce pressures on the rupiah. The Trade Ministry had issued a regulation that exporters of key commodities like oil and gas, palm oil, coal and other minerals must use letter of credit to qualify for overseas shipping.

This measure, according to Trade Minister Enggartiasto Lukita, would bring back at least 50 percent of foreign currency earnings deriving from the export of the commodities into Indonesia.

Despite investors are in risk-averse mood, the government still managed to raise Rp4.9 trillion from Sukuk auction on Tuesday (18/09), out of bids worth Rp8.1 trillion.

Supports from the financial market may also came from domestic car sales, which rose 5.1 percent year-on-year to 102,197 units in August. Car sales data is a key indicator on the health of Indonesia economy.

From politics, the ruling coalition’s Vice President (VP) Ma’ruf Amin hurled his first direct attack toward the opposition camp. The influential cleric raised doubts over the opposition’s claim that their VP candidate, billionaire Sandiaga Uno, can be considered as Ulema, a title given to a scholar of Islamic teachings.

May you have a profitable day.

TIS Intelligence Team, Email: