Investors shaken by the recent slide in emerging market assets – which seems to be heading to boiling point this week with the Indian rupee hitting yet more record weak levels against the dollar and the Indonesian rupiah hitting multi-year lows amid severe outflows from EM assets – will likely be keenly watching for news out of Indonesia on Friday as the country announces a policy package to mitigate the financial turmoil.

Government bodies "are formulating a set of policies to respond" to falls in the rupiah, stocks and bonds, Pres. Susilo Bambang Yudhoyono told media following a limited cabinet meeting Wednesday.

Indonesia has been an investment darling in recent years but its debt, stocks and currency have been slammed in recent months as the U.S. Federal Reserve hints it may be turning down the stream of quantitative-easing cash that has boosted EM assets in recent years. Indonesia is also beset by a persistent current account deficit, a recent increase in inflation, and slower recent growth rates, as well as a level of political and regulatory uncertainty ahead of general and presidential elections next year, with Yudhoyono, largely popular with the global investment community over most of the course of his two term-limited stints in office, unable to run again and his party lacking a realistic candidate for 2014.

"Near-term, our target is [raising] investment amid falling exports,” Yudhoyono said. He added that it will be " difficult to reach the [government’s] 6.3 percent economic growth target” for this year, but that the authorities “will cooperate with the private sector to avoid layoffs, as that would make it difficult for our people to meet their daily needs."  

Rupiah hits four-year low; stocks rise, although help is needed

The rupiah fell 0.7% intraday to IDR10,755 against the dollar in Jakarta a.m. trade, its weakest level since April 2009, according to Bloomberg data. The Jakarta Composite Index closed just over 1% higher at 4174.98 points after state pension fund Jamsostek stepped in to buy equities, with local media reporting the fund’s chairman as saying it will increase equity weighting in its investment mix to 22%-25% from 19%.