Macro ok but Micro not so

The rupiah continues to perform better than expected, hovering steady just below Rp14,000 per US dollar. The rupiah and US dollar interest rate movements, which a month ago moved in opposite directions, has yet to adversely impact the rupiah. In fact, there is enough confidence that if inflation, at its current 4.1 percent level, can be maintained, it could lead to the possibility of a second 25 basis point cut in Bank Indonesia's benchmark interest rate.

But the stock market's Jakarta Composite Index (JCI) is underperforming, dropping to 4,500 for the last six months. The bond market, though, is doing better, attracting both local and foreign investors. The question is how sustainable is this trend? Some are pointing to the negative interest rates in Japan and the low yields of other global currencies. The argument is that the resulting interest differential, between these currencies and the rupiah, is wide enough to cover the rupiah exchange rate volatility. This is why maintaining a stable rupiah becomes critical.