INDONESIA: Could Indian Positive Sentiment Spill Over to Indonesia? (Part 1)
- Indonesia has had a challenging start for its financial markets in 2026, with Finance Minister Purbaya going on the front foot in a BBG TV interview defending his government's economic track record.
- Purbaya sought to allay fears of a fiscal blowout committing his government to 3% fiscal deficit cap, whilst downplaying the President's nephew as new deputy BI Governor. On the latter he was clear that he will not interfere with BI policy decision making, rather ensuring the fiscal and monetary policymakers are working together.
- He saw the MSCI warning as a good thing stating that "once the government corrects the lack of transparency, it will remove the disease from the market,” and “People will take a look at the fundamentals of the economy again, which are strong.”
- In EM space, India is widely considered the most direct peer for Indonesia regarding yield performance and investor sentiment.
- Year to date Indonesia financial assets have struggled with the JCI down -6% (NIFTY 50 -1.5%), 10-Yr INDOGB -3.5% (UST 10-Yr -2.4%, INDIA 10-Yr -2.2%) and the Rupiah -0.45% (Rupee -0.44%)
- Currency woes weigh heavy on bond flows in Indonesia, and despite regular BI intervention, it requires an additional / new catalyst for a turnaround.
- Purbaya is right in that the underlying economy / economic data is robust but for now not the catalyst. However looking farther afield, could a tariff deal for India lead to a turnaround for INR and be a catalyst for IDR stability?
Fig 1: USDINR vs USDIDR
source: Bloomberg Finance LP / MNI
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
CHINA PRESS: Beijing Calls For Improving Expectation On Real Estate
Authorities should maintain strong policy support to stabilise the real estate market, ensuring measures meet market expectations and avoid a piecemeal approach, while coordinating with other macro policies and preparing for potential developer bankruptcies and restructurings, according to a commentary published by the party-run magazine Qiushi. The magazine also said it was necessary to strengthen price monitoring and improve expert interpretation of sensitive indicators, including real estate investment, the number of foreclosed properties, and developers’ bankruptcies and debt restructurings, in order to better guide market expectations.
AUSTRALIA: November CPI This Week’s Focus As Market Has Hikes Priced In
The focus of this week will be Wednesday’s November CPI, which is the new complete monthly series. While the quarterly data on 28 January will be the decisive input into the 3 February RBA decision, the new monthly headline and services have a very close fit with the previous monthly CPI series. However, the new trimmed mean will need some time for not only the seasonal adjustment factors to emerge but for the trend to emerge as there is also very limited history.
- The new trimmed mean CPI appears less volatile than the incomplete series but printed 0.7pp higher at 2.8% y/y in June 2025, which was the recent trough. Q2 was at 2.7% y/y overall.
- Bloomberg consensus is forecasting trimmed mean to be stable at 3.3% in November, which would be at or above the top of the RBA’s 2-3% band for the fifth consecutive month. Headline is expected to moderate 0.2pp to 3.6% but this series continues to be distorted by previous government electricity rebates.
Australia CPI trimmed mean y/y% - new vs old monthly series
Source: MNI - Market News/ABS
- Building approvals for November are also out on Wednesday and are projected to rise 2.0% m/m after falling 6.4% m/m. The data is particularly volatile due to the multi-dwelling component.
- Thursday sees November trade data with the merchandise surplus forecast to widen slightly to $5.0bn from $4.4bn.
- The final December S&P composite/services PMIs are released on Tuesday. The preliminary readings showed activity remaining positive but slowing from November and Q4 growth softer than Q3.
CHINA PRESS: A-shares Seen To Rise Early This Year
China’s A-share market performance will be supported by the restructuring of the international order and the country's industrial innovation, potentially with an initial rise followed by stabilisation, Securities Times reported citing Li Qiusuo, chief domestic strategy analyst at China International Capital Corporation (CICC). A-shares are expected to see a sustained rise in a stable external environment till the end of the U.S. midterm elections with the implementation of a China-U.S. trade deal, but external disturbances may increase sharply after the election, said Qiu Xiang, chief A-share strategist at CITIC Securities.
