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Window dressing at IDX ahead of Fed rate hike
Analysts predict that market players in the Indonesia Stock Exchange (IDX) will carry out âwindow-dressingâ with their companiesâ stock even as the US Federal Reserve (Fed) prepares to increase its fund rate in December
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nalysts predict that market players in the Indonesia Stock Exchange (IDX) will carry out 'window-dressing' with their companies' stock even as the US Federal Reserve (Fed) prepares to increase its fund rate in December.
In this 'window-dressing' process, investors prop up the market by bidding on mutual funds and a portfolio manager's own shares in the market, and in so doing, increase market prices through artificial demand. This kind of action is usually carried out near the end of the year.
Previously, several analysts expressed concern that the rate hike would encourage capital outflows from the bourse and thus could weaken the the benchmark Jakarta Composite Index (JCI) ' the main price barometer in the local bourse.
First Asia Capital analyst David Sutyanto predicted on Friday that large capital outflows would happen before the Federal Open Market Committee (FOMC) in mid December. After the increase in the Fed rate, the amount of the ouflows would not be significant.
'Local fund managers will keep window-dressing,' he said, projecting that this would happen in December's second and third weeks after the FOMC announcement on Dec. 16.
In statements issued on Oct. 28, the FOMC said it would assess the progress ' both realized and expected ' toward its objectives of maximum employment and 2 percent inflation to determine 'whether it would be appropriate to raise the [federal fund rate or FFR] target range at the next meeting'.
The Fed currently maintains its target range at between 0 and 0.25 percent.
Meanwhile, MNC Securities research head Edwin Sebayang predicted that market players would prop up their portfolios starting at the end of November until December's second week.
'Fund managers, insurance companies and even the listed companies themselves, like lenders, will do the window-dressing as they have an interest in propping up their portfolios,' he said.
Edwin added that several shares in the property, infrastructure, consumer goods and banking sectors, which had successfully weathered the gloomy market, had the potential to experience an increase.
The shares included state-owned Adhi Karya, Pembangunan Perumahan, Waskita Karya and Jasa Marga in the infrastructure sector and Indofood CBP Sukses Makmur and Unilever Indonesia in the consumer goods sector.
Meanwhile, in the banking and property sectors, Bank BCA and Bank BTN as well as Ciputra Development and Bumi Serpong Damai will likely see their shares increase.
Data from the IDX revealed that the JCI ended the day on Friday at 4,561.33, or 0.94 percent higher than the previous close. The index has lost 12.73 percent of its value so far this year and has recorded foreign net sales amounting to Rp 20.03 trillion (US$1.46 billion).
Lucky Bayu Purnomo, a senior analyst from LBP Enterprise, revealed his research results on market trends and behavior in 2012 and 2013. The index increased 4.9 percent on average during the November and December months of those years.
'The JCI will meet its psychological value and lock it in at around 4 percent,' he said. He predicted the index would reach between 4,650 and 4,691.
Lucky said that buyers would prepare themselves between the end of November and early December and then aggressively enter the market before Christmas eve.
