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Exactly 20 years ago, Southeast Asian financial markets had a meltdown. Now the damage it inflicted has all but disappeared, even in Indonesia, the hardest hit country in the region. Before the Idul Fitri long break two weeks ago, the stock price index reached its highest point in history. Yields for 10-year government bonds also dropped, a sign of stronger investor confidence. The rupiah exchange rate is stable. The market happily took an extended long vacation.
As we enter the last week of Ramadan fasting month, the Rupiah is trending stronger, hovering around the Rp13,300 per US dollar level, even with the second US Federal Reserve's 25 basis points rate hike. Meanwhile, Jakarta's Composite Index (JCI) has also risen and now is fluctuating around the 5,700 level. All this is due to the rising inflow of foreign funds, partly a result of the country's recent rating upgrade to investment category by Standard & Poor's. This explains Bank Indonesia's (BI) subsequent response of keeping its benchmark 7-day repo rate at 4.75 percent.
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