Indonesian stocks and the rupiah gained on Monday on news that China would let its currency appreciate

The Jakarta Composite Index rose 12.31 points, gaining for a seventh-straight day, its longest winning streak since January. (Antara Photo)
Looser Yuan, Moody’s Outlook Upgrade Extend Winning Streak for JCI, Rupiah

Indonesian stocks and the rupiah gained on Monday on news that China would let its currency appreciate and Moody’s upgraded Indonesia’s rating outlook.

The Jakarta Composite Index rose 12.31 points, or 0.4 percent, to close at 2,941.90, gaining for a seventh-straight day, its longest winning streak since January.

Trading volume was heavy, with 6.5 billion shares worth Rp 5.2 trillion ($577.2 million) changing hands. Gainers outnumbered decliners 116 to 78.

Suryadi Candra Kasih, of PT AM Capital Indonesia’s online trading division, said Beijing’s pledge to relax the yuan peg to the dollar fueled buying, especially in commodities, because a stronger yuan could mean increased demand for resources such as coal.

PT Bumi Resources, Asia’s largest exporter of power-station coal, gained 4.3 percent, while PT Adaro Energy, the country’s second-biggest producer, surged 4.8 percent. PT International Nickel Indonesia, the nation’s biggest producer of the metal, advanced 1.3 percent, while PT Aneka Tambang, the second largest, added 1.3 percent.

The People’s Bank of China pledged over the weekend to make the yuan more flexible, while ruling out a one-time revaluation. China buys about 10 percent of Indonesia’s exports and is its third-largest overseas market.

“If China allows its currency to strengthen it will benefit the rupiah and other Asian currencies,” said Tetsuo Yoshikoshi, a senior economist at Sumitomo Mitsui Banking in Singapore. “It was natural to see Asian currencies strengthening. Indonesia will benefit from exports to China.”

Meanwhile, the rupiah gained after Moody’s raised the country’s rating outlook to positive from stable, praising the government’s stability and the effectiveness of its fiscal and monetary policies. The rupiah advanced for a fourth-straight day, rising 0.9 percent to 9,019 per dollar by 4:15 p.m.

The currency is expected to rise further on the brighter outlook for the economy, but market players remain cautious over intervention by the central bank to curb its strength.

“The Indonesian economy fundamentally is in good shape,” a foreign bank dealer in Jakarta said.

“I want to check the reaction at 9,000, the last strong support, when Bank Indonesia keeps intervening to minimize volatile movements. If it breaks through that level, definitely the rupiah will go to 8,900.”

Indonesia, which has seen record inflows this year in its bond markets, along with South Korea and Malaysia, saw yields fall further after Moody’s upgraded its outlook.

By afternoon, 10-year bond yields were down 20 basis points, the biggest drop since late May, to a record low of 8.2 percent.

It has fallen 100 basis points so far this month.