Formal Name: Republic of Indonesia
Local Name: Indonesia
Local Formal Name: Republik Indonesia
Indonesia and Systematic Trading
Indonesia is the largest economy in Southeast Asia and the fourth most populous country in the world. It is also one of the most important commodity producers on the planet: the world’s largest producer of palm oil, the largest exporter of thermal coal, and the largest producer of nickel. Prices for each of these commodities are set in global markets, and Indonesian supply decisions show up in them as sustained price trends that systematic traders follow without needing to forecast Jakarta’s policy choices.
Nickel is the clearest recent example. Indonesia banned exports of raw nickel ore in 2020 to build a domestic processing industry, and it has since become the dominant source of new nickel supply worldwide. The London Metal Exchange nickel contract has produced some of the most extreme trends in any market as a result, including the March 2022 short squeeze in which prices more than doubled in two sessions and the exchange suspended trading and cancelled trades. That episode is a reminder that diversification across many markets is the only protection against a single market changing its rules.
The rupiah gave the world one of its sharpest currency trends during the 1997–1998 Asian financial crisis. It fell from around 2,400 to the US dollar in mid-1997 to beyond 16,000 by June 1998, a collapse of more than 80% that helped bring down the Suharto government. The same pattern has repeated on a smaller scale since, including the 2013 “taper tantrum.” Each move was a policy and capital-flow story to economists. To a trend follower, each was a trend in the price.
The Indonesia Stock Exchange in Jakarta lists the IDX Composite index, which is weighted toward banks, consumer companies and commodity producers. For Indonesian investors, a globally diversified systematic portfolio offers returns that do not depend on the rupiah, the domestic banking sector or the commodity cycle that drives so much of the local economy.
The 30-minutes-per-day standard fits Western Indonesian Time (WIB, UTC+7). US futures markets close before the Jakarta working day begins, and European markets close in the evening, so end-of-day signals for a global futures portfolio can be prepared each morning before the local open.
Frequently Asked Questions
Why is Indonesia important to commodity trend followers?
Because Indonesia is the world’s largest producer of palm oil and nickel and the largest exporter of thermal coal. Changes in Indonesian output and export policy show up as sustained trends in the global prices of those commodities, which a systematic trader can follow through futures markets.
What did the 1997–1998 rupiah collapse show about currency trends?
That emerging market currencies can trend further and faster than any forecast allows. The rupiah lost more than 80% of its value against the US dollar in about a year. A trend following system does not need to predict such a move. It follows the price as the move develops.
What does the 2022 nickel squeeze teach systematic traders?
That an exchange can suspend trading or cancel trades in extreme conditions. No rule set can control that risk in a single market. The protection is position sizing and diversification across many markets, so that no single event decides the result.
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