John Rachmat, Independent Commissioner at Pinnacle Investment, talks about the drivers of the Indonesian stock market rally that wiped out its year-to-date losses, and what could derail its rise.

Jakarta

Indonesia's recent stock market rally has occurred despite limited improvement in domestic earnings. Analysts highlight two main risks that could reverse this trend: domestic economic pressures, particularly from increased Chinese imports leading to layoffs, and potential volatility in the US bond market. 

China's ability to redirect exports to regions like Indonesia has resulted in significant job losses, raising concerns about reduced consumer spending. Additionally, Indonesia's bond market has historically moved in tandem with the US, so any major disruption in US bonds could impact Indonesian assets, though some suggest the correlation may be weaker due to current US political dynamics.

Indonesia stocks at risk from domestic performance, U.S. bond moves

Based on what we've looked at, it seems that the economic fundamentals or the economic questions, at least with regards to Indonesia, haven't changed. Earnings doesn't seem to have really improved by a significant clip. What do you think are some of the things that drove this recent rally over the last two months that's been good for the Jakarta Composite? And what do you think are those conditions that could actually see this reverse if there is a scenario that's possible where we could see a reversal? The only time the Indonesian equity and bond markets crashed were when the foreign investors exited in a hurry. This is what happened in 2022, 2018, back in 2013. Basically, when they stampeded toward the exit, that's when both the equity and the bond markets would crash. So my question would be, in current times, what kind of events would result in that kind of outcome? In my mind, there are two clear risks. First risk is about the economic conditions of Indonesia. And the second risk is if there is a crash in the US bond market itself. Taking them one by one, talking about the Indonesian economy, first of all, the impact of tariff is only slowly, slowly coming to Indonesian economy. Now, everybody is focusing on the potential decline in Indonesian exports to the US. To me, that is not actually the most risky proposition, because in terms of contribution to GDP, Indonesian GDP, the net export is pretty low. What is far more important, in my mind, is that China is successfully redirecting their exports to the US, to other regions, including Indonesia, of course. Last year, there have been 77,000 workers laid off because their businesses could not compete with cheap Chinese imports. And last year, the president was Joe Biden, and there was no trade war between China and the US. So this year, with such an aggressive trade war between China and the US, you could expect quite an impact. First half, the number of layoffs have actually increased by 32% year on year. Looking at China itself, in the full year of 2024, the portion of China exports to the US is about 14-15% of their total exports. In the first half of this year, that has gone down to 11%. So China has been very successful to reorient their exports. Their total exports increased, actually. The total export revenue for China increased by almost 5.8% in the first half of this year. So they exported a lot more to Europe, to Southeast Asia, to Africa, and definitely to Indonesia also. That effect will have a really devastating impact on the Indonesian economy if that results in a lot of layoffs, and therefore a big reduction in consumer spending. That's the first risk on the Indonesian economy. The second risk is if there is a crash in the US bond market. Here, I think we are a little bit more skeptical. But, for example, the US investors have been so gung-ho about potential interest rate cuts this year. I think the Fed fund rate futures is pencilling an 85% chance for a cut in the September FOMC meeting. If that doesn't happen, for example, that probably would have caused quite a problem for the bond investors. Now, in the past, the Indonesian bond markets almost moved in synchrony with the US bond market. So if the US bond market should face a big fall, then that is obviously a risk for Indonesia. However, some people might argue that this time around is indeed different. The reason why it's different is because we have a US President who, with his chaotic style of governing, is really hurting the status of the US Treasury as a safe haven. So that kind of strong correlation between the US bond market and the Indonesian bond market may not happen this year.

Ukrainian President Volodymyr Zelenskyy said Tuesday that he had a productive talk with President Trump focused on ending the war with Russia. CBS News national security contributor Samantha Vinograd has more.

Kyiv

Ukraine Invasion

Zelenskyy holds 'productive talks' with Trump about war

Family members of two of the victims from the 2023 implosion are demanding tougher regulations following the damning report released on Tuesday. Five people died when the submersible imploded off the coast of Newfoundland.

Washington

Deadly Titan submersible disaster was preventable, Coast Guard says

The House Oversight Committee has subpoenaed multiple people over the Jeffrey Epstein files, including former President Bill Clinton and former Secretary of State Hillary Clinton. CBS News' Jake Rosen has more details.

House committee subpoenas Clintons, others over Epstein files

U.S. Customs and Border Patrol agents have been directed through a federal court order to stop deportations under President Trump's asylum ban, sources say. CBS News' Camilo Montoya-Galvez has more details.

Court blocks deportations under Trump's asylum ban, sources say

A man suspected of murdering four family members in Tennessee has been captured after a four-day manhunt, authorities said. CBS News' Nicole Valdes has more.

Jackson

Suspect arrested in murders of 4 Tennessee family members

The ruling comes a month after Brazil’s top court ordered the former president to wear an ankle monitor, submit to a curfew and abide by limitations on his activity as legal proceedings investigating an alleged coup plot continue.

State of Rio de Janeiro

Brazil's Supreme Court orders house arrest of Bolsonaro

The US and Lebanon have been holding talks on a roadmap to fully disarm Hezbollah. Lebanon's new leadership has pledged to extend its authority across all its territory but has so far avoided acting against Hezbollah.

Beirut

Lebanon faces renewed pressure to disarm Hezbollah

CBC News had exclusive access to a Canadian Armed Forces plane that dropped about 10,000 kilograms of humanitarian aid into Gaza, the first time Canada joined the airdrop operations. Several countries airdropped food on Monday, but aid organizations agree they are more symbolic than effective.

Ottawa

Middle East Conflict

Canadian military makes aid drop into Gaza

The Prime Minister's Office said to the Chief of Staff, Lieutenant General Eyal Zamir that, "If this does not suit him, you should resign."

Jerusalem

Israel's Netanyahu says decision made for full occupation of Gaza

Delegates are gathering this week at the United Nations in Geneva, attempting to negotiate a global treaty to curb plastic pollution. But diplomats and climate advocates warn that efforts by the European Union and small island states to cap virgin plastic production are threatened by opposition.

Geneva

Strong UN treaty on plastic pollution in doubt as talks resume

President Trump announced Friday on social media that he ordered two nuclear submarines to move into more strategic positions near Russia. On Monday, Russian officials downplayed the comments and warned about the risk of nuclear rhetoric.

Moscow

Russia downplays Trump's announcement about nuclear submarines

U.S. trade representative Jamieson Greer told "Face the Nation" that tariff rates are "pretty much set" ahead of President Trump's Aug. 7 deadline. CBS News MoneyWatch correspondent Kelly O'Grady has the latest.

Global Tariffs

White House holds firm on tariff rates ahead on Aug. 7 deadline

Donald Trump confirmed his special envoy Steve Witkoff will visit Russia, ahead of a deadline the U.S. president has set for Russia to agree to end the Ukraine war or face new sanctions. Witkoff is expected in Moscow in the middle of this week.

U.S. envoy Steve Witkoff expected to visit Russia

New images of emaciated Israeli hostages held in Gaza have horrified Israelis and added pressure on Prime Minister Benjamin Netanyahu to reach a ceasefire with Hamas, even as his government considers another expansion of the nearly 22-month war.

Tel Aviv-Yafo

Videos of hostages increase pressure on Netanyahu for ceasefire

Pope Leo XIV wrapped up a weekend jubilee for more than 1 million young Catholics at a Rome suburb. As a new generation from around the globe celebrated, the pope drew attention to their peers in Ukraine and Gaza who cannot.

Rome

Pope Leo XIV addresses Gaza, Ukraine at youth festival

A shipwreck off Yemen has killed at least 68 people, the UN's migration agency said, with dozens still missing after the boat carrying mostly Ethiopians sank.

Sana'a

Migrant boat sinks off Yemen, killing at least 68

After two unverified videos of Israeli hostages were released, Hamas said the hunger crisis in the region puts them at risk. The militant group said it would deliver food from the Red Cross to the hostages under a couple of conditions, including permanent humanitarian corridors.

Hamas says hunger crisis putting hostages at risk

U.S. President Donald Trump fired the U.S. commissioner of labour statistics after weak jobs numbers signaled tariffs weren’t yet leading to his promised economic boom.

Trump dismisses weak jobs numbers, fires labour statistics chief

Government scientists warn that the 2025 wildfire season in North America is projected to be the longest ever, with fires already causing significant damage across the western United States and Canada. Major blazes have led to evacuations, destruction of historic sites, and widespread air quality alerts.

Santa Barbara

Wildfire season in North America shaping as worst on record

A volcano in Russia's Far East has erupted after sitting dormant for 600 years. Scientists believe the eruption was triggered by the massive earthquake that struck the region last week.

Kamchatka Peninsula

Russian volcano erupts for first time in 600 years

An independent watchdog agency responsible for enforcing a law against partisan political activity by federal employees has opened an investigation into Jack Smith, the special counsel who brought two criminal cases against Donald Trump before his election to the White House last year.

Former Trump prosecutor Jack Smith faces probe by U.S. watchdog

New outbreaks of violence overnight into Sunday (August 3) rocked Syria straining a fragile ceasefire. Meanwhile residents in Sweida are calling access to more humanitarian aid.

As Suwayda

Humanitarian needs escalate in Sweida as truce frays

Parts of the European Commission's much-anticipated AI Act come into force this weekend. It's been hailed as the first piece of comprehensive legislation aimed at regulating AI globally, though critics say it doesn't go far enough.

Brussels

Rise of AI

EU's landmark AI act enters new phase

A Ukrainian lawmaker and a pair of local officials, as well as an unspecified number of National Guard personnel, have been caught in a major graft scheme that involved using state funds to buy drones and other military hardware at deliberately inflated prices in return for bribes.

Ukraine uncovers major drone procurement graft scheme

Over the past few days, Hamas and its ally Islamic Jihad have released three videos showing two hostages seized during the October 7, 2023, attack on Israel that triggered the ongoing war in Gaza. The videos sparked reactions from Israelis who are stepping up calls for a truce.

Israeli hostage families protest in Tel Aviv

Pope Leo XIV celebrated the concluding mass of one of the most important events of the Holy Year. A million faithful filled the Tor Vergata esplanade in Rome. Pope Leo sent a message of hope for the young people afflicted by wars and recalled the words of his predecessor.

Pope Leo urges Catholic youth to spread faith and enthusiasm

President Trump explained why he fired Bureau of Labor Statistics Commissioner Erika McEntarfer on Friday. Government data showed fewer jobs were added to the U.S. economy last month than expected.

Trump announces new tariff rates, fires employment commissioner

Former Special Counsel Jack Smith, who ran two federal prosecutions of President Trump, is under investigation for allegedly violating a law barring federal employees from using their position to influence elections.

Jack Smith investigated for using position to influence elections

Montana authorities released a new surveillance image showing who they have identified as the suspect in a bar shooting in Anaconda. Meanwhile, nearly 2,000 miles away, police in Tennessee are searching for a quadruple homicide suspect.

Anaconda

Suspect on the run after Montana bar shooting

Los Angeles officials are praising an appeals court ruling limiting immigration stops, but the decision may only escalate a battle over transparency and control. Elise Preston has the latest information.

Breakdown