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JCI in focus: All eyes on rupiah, inflation
Building up: Infrastructure spending may open room for a market rebound for the last week of September
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Building up: Infrastructure spending may open room for a market rebound for the last week of September. (Kompas) (Kompas)
Building up: Infrastructure spending may open room for a market rebound for the last week of September. (Kompas)
The JCI dropped 3.9 percent last week to 4,209.44, along with the US' Standard & Poor's 500 Index, which lost 1.4 percent. Firm action is now urgently awaited to safeguard the rupiah and stop inflation from ballooning.
NH Koorindo Securities head of research Reza Priyambada said investors would wait for next week's release of September inflation data, while at the same time focusing their attention on the rupiah's decline.
Stable inflation would not necessarily entail higher interest rates, and could prevent the currency from depreciating further, Reza said.
He added that the room for interest rate increases was limited given the rising credit risk in the banking industry and shrinking foreign reserves.
'The question now is how the central bank and the finance minister will stop the rupiah from further depreciating,' Reza told thejakartapost.com on Sunday.
According to Reza, Bank Indonesia's ammo is limited, with reserves shrinking by more than US$2 billion in the last month.
'As the fiscal authority, what can the finance minister do about it?' he asked.
Investors, Reza said, needed assurances that fiscal policies aimed at boosting economic growth would be seriously implemented.
'For example, the stimuli to boost industry must be announced more clearly, and infrastructure spending must be disbursed faster,' he said, adding that doing so would create relief and optimism in the equities market, which in turn might make room for a market rebound next week and in the medium term.
Yellen's confirmation
HD Capital senior researcher Yuganur Wijanarko, meanwhile, said that despite the JCI's drop last week, the market was pleased to have confirmation of this year's planned Fed fund rate increase, following a speech from Federal Reserve chair Janet Yellen on Thursday.
Yellen's announcement, which led to turbulence in emerging markets, would not harm growth in the US, Yuganuar said.
Growing US GDP meant, he went on, that the Fed was more likely to raise its rate in October or November, ahead of the scheduled December.
Uncertainties have seen the US stock benchmark index tumble 6.4 percent in the second quarter, its worst quarterly performance in four years, according to Yuganur.
He went on that the market consensus expected an October Fed rate hike, which could help the JCI rebound to test its resistance area at around 4,300.
Reza argued that both eventualities ' an earlier or a later Fed rate increase'would have the same impact on Indonesia: short-term capital outflow, and a better long-term export outlook.
In the short-term, the role of Bank Indonesia (BI) is badly needed. But, according to Reza, the key is now in the hands of President Joko 'Jokowi' Widodo's economic team.
They must be able to send positive signals to the market of action being taken to boost the economy, he said, given the central bank's limited ability to intervene in the market. (dk)
