The Indonesian stock market, having fallen by a fifth last year, has made a remarkable comeback. The Jakarta Composite Index has bounced by 10% this year – 20% in dollar terms – and looks unlikely to run out of steam just yet.
Interest rate hikes by the central bank stabilised the currency, which slid last year amid fears over reliance on foreign capital: the current account deficit had reached 4.4% of GDP.
But the external gap has eased now, as higher interest rates helped curb imports by dampening consumption; also, the cheaper currency bolstered exports.
This should continue, says [...]
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