Figure 3: Movements in Indonesia Stock Exchange (IDX) and SUN Yield Index 10 year maturity, August 2011 – August 2014 (%)
IDX has posted modest growth, yield SUN yield shows an upward trend once again

Source: IDX, CEIC, and Bloomberg (2014)

During the closing session on 29 August 2014, Indonesian Stock Exchange (IDX) continued to show positive albeit flat trend. Despite posting a slight increase (0.94%) compared to the position in the previous month, IDX reached 5,136 levels in August 2014.  Besides, IDX reached a new benchmark when it broke 5000 points price level. In fact, on 21 July 2014, IDX closed at 5,206, which is the highest level for IDX, which occurred at a time when the outcome of the Presidential elections were announced. Nonetheless, in late June 2014, IDX suffered a correction of -0.31% compared with the previous month. This was attributable to restrictive liquidity, as well as a continuation of the “wait and see” attitude of investors.  The hope is that such a condition will not come to end sooner than later, as a result of flawless conduct of the general elections, which induced high market optimism in the newly elected government. Meanwhile, during quarter II-2014 foreign investors bought IDR 19.5 trillion  in securities, which is lower than the volume of transactions made in quarter I-2014 of IDR 24.62 trillion . Moreover, the Sharia Index contributed 60% of the performance of IDX valued at IDR 5, 200 trillion (y-t-d) on 27 August 2014.
On the other hand, bonds markets registered an increase in the yield on State Bonds (SUN) in late August 2014. Sun yield rose by 11 bps to become 8.28% compared with the previous month. In late July 2014, SUN yield was 8.16% lower than 8.35% posted in June, 2014. The fluctuation was attributable to the fact that investors are still in “wait and see” mood as they explore and project economic conditions in the wake of the presidential elections. In the meantime, net purchases of securities by foreign investors on government securities (SBN) registered IDR 42.68 trillion, which during quarter II-2014 showed an increase of IDR 37.08 trillion. read more

The level of international reserves in May 2014 reached USD 107.048 billion, which was an increase of USD 1.485 billion compared with the position in April 2014. The international reserve position can finance 6.2 months of imports, which criteria makes it fulfill international adequacy standard (three months of imports). Subsequently, in April 2014, international reserves reached USD 105.56 billion, which represented an increase of USD 2.97 billion compared with the position in March 2014. The increase in the level of international reserves came as a consequence of an increase in oil and gas exports during April–May 2014 period and improvement in capital flow to Indonesia in May 2014.  Bank Indonesia, through PBI No. 14/25/PBI/2012 on foreign exchange revenue derived from exports and external debt related withdrawals seemed to have registered success in forcing exporters to deposit their revenues in foreign exchange banks. Consequently, the policy has contributed to improving Indonesian international reserve position. Meanwhile, in March 2014, international reserve position decreased by USD 149 million which represents a decline of 0.145% compared with the level registered in the previous month. The decline in the international reserve position is attributable to efforts by the government to repay USD 2 billion of its bond obligations that reached maturity. To that end, Bank Indonesia, expects the international reserve position to decline in quarter II-2014. On a seasonal basis, quarter II is often characterized by maturity of securities that require payment of interest, dividends, and royalties. read more