Stock Market in Indonesia Potentially Prolonging Downturn
The global outlook for Asian markets remains cautiously optimistic, as domestic factors and global influences interplay in a complex dance.
In Indonesia, the market is buoyed by significant monetary easing. The country's central bank, Bank Indonesia, has cut policy rates three times in 2025, lowering them from 6.0% to 5.3%. This move has stimulated local corporate issuance and lowered borrowing costs, benefiting the Indonesian stock market.
However, the U.S. Federal Reserve's stance contrasts with Indonesia's. After holding rates steady for most of 2025, the Fed is now expected to start cutting rates, possibly from September, although this decision will be data-dependent and made carefully due to inflation risks.
Asian markets, including China and Hong Kong, have shown strong rallies recently. Chinese A-shares have caught up after a robust Hong Kong market performance. However, there are concerns that these rallies may be getting ahead of the actual slowing economic fundamentals, with investors hoping for more stimulus or supportive policies from Asian governments to sustain gains.
Despite these concerns, Asia ex-Japan equities are expected to outperform global equities amid fading tariff headwinds and as regional central banks continue easing. A regionally diversified approach across Asian equities and bonds is recommended, with an emphasis on local currency bonds and selective equities benefiting from easing and policy support.
The U.S. economy is experiencing some uncertainty due to the release of mixed economic data. Retail sales in the U.S. increased in line with estimates in July, but the Federal Reserve observed a slight pullback by industrial production in the same month. Additionally, the Labor Department reported that import prices increased more than expected last month. The U.S. economy's performance has a ripple effect on the global markets, including Asia.
The Jakarta Composite Index (JCI) finished at 7,898.38 on Friday, down by 0.41 percent, snapping a five-day winning streak. The index was influenced by the performance of various companies, including Bank CIMB Niaga, Bank Danamon Indonesia, Bank Negara Indonesia, Bank Central Asia, Bank Rakyat Indonesia, Indosat Ooredoo Hutchison, Indocement, Semen Indonesia, Indofood Sukses Makmur, United Tractors, Astra International, Energi Mega Persada, Astra Agro Lestari, Aneka Tambang, Vale Indonesia, Timah, Bumi Resources, and Bank Mandiri.
Notable movements include Bank Rakyat Indonesia, which rallied, while Bank CIMB Niaga, Bank Danamon Indonesia, Bank Negara Indonesia, Bank Central Asia, and Bank Rakyat Indonesia experienced losses. Energi Mega Persada and Aneka Tambang experienced gains, while Vale Indonesia plummeted by 6.11 percent.
Crude oil traded lower on Friday ahead of the meeting between the presidents of the U.S. and Russia. West Texas Intermediate crude for September delivery was down $1.20 or 1.88 percent at $62.76 per barrel.
The meeting between the presidents of the U.S. and Russia accomplished nothing, according to reports.
The University of Michigan noted an unexpected deterioration in consumer sentiment in August. This adds to the uncertainty in the U.S. economy.
In summary, the outlook for Asian markets is generally favorable but calls for vigilance on inflation, global interest rate moves, and underlying economic data in Asia. The regionally diversified approach across Asian equities and bonds is recommended, with an emphasis on local currency bonds and selective equities benefiting from easing and policy support.
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