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Under pressure from ECB and the Fed, Indonesian market slides into the red
This Oct
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This Oct. 2, 2014 file photo shows a Wall Street sign adjacent to the New York Stock Exchange, in New York. (AP/Richard Drew) (AP/Richard Drew)
This Oct. 2, 2014 file photo shows a Wall Street sign adjacent to the New York Stock Exchange, in New York. (AP/Richard Drew)
The Indonesian stock market has gone into the red under global market pressures emanating from the failure of the European Central Bank's stimulus program to revive Europe's stagnating economy and the US Federal Reserve (Fed)'s intention to increase its interest rate.
The Jakarta Composite Index (JCI), as of 4 p.m., had declined 0.64 percent since the market opened earlier in the day. All of the indexes went into the red except for miscellaneous industry and the trade sector index. These sectors saw positive increases of 1.31 and 0.34 percent, respectively.
Investors expressed their disappointment with the ECB's stimulus program to cut interest rates and make bond purchasing easier in a bid to boost the European economy. The ECB cut the deposit rate to negative 0.3 percent from negative 0.2 percent, encouraging banks to lend more freely.
The ECB will continue to undertake quantitative easing by extending the bond purchasing program until March 2017. ECB president Mario Draghi explained that the budget for the program budget would reach 60 billion euros.
Meanwhile, in the United States, Fed chairwoman Janet L. Yellen signaled that the Fed would increase its interest rate. She told the US congress in Washington, D.C., on Thursday, that the US economy was strong enough to sustain a rate rise.
Yellen argued that the US economy was getting stronger because American customers were spending more. Domestic spending in US is growing around three percent a year.
The Fed's plan received pushback from US Democrats because the sluggish US inflation rate and the unemployment rate were both still higher than they were before the 2008/2009 recession. The Fed said that they would continue to look to recent economic data to evaluate their position.
These pressures have caused declines in the global stock market. In Europe, Germany's DAX and France's CAC 40 decreased 0.24 and 0.32 percent, respectively. In the US, the S and P 500 fell 1.4 percent and the Nasdaq decreased 1.7 percent. In Asia, Japan's Nikkei declined 2.2 percent and Hong Kong's Hang Seng dropped 0.8 percent. The FTSE Bursa Malaysia Index slumped 0.9 percent and Singapore's FTSE Straits Times All-Share Index fell 0.17 percent.
Budi Frensidy from the Faculty of Economics and Business at the University of Indonesia saw the downturn as an opportunity to increase public participation in the stock market.
Presently, the JCI position sits at 4,508.45 and according to Budi, if the index fell below 4,500, it would be a good opportunity for new domestic investors to enter the market. "An increase in domestic investors is key to countering the global pressures," he said. (dan)
