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Brexit, Fed rate hike to strongly affect debt market: IDX
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A man passes the iconic round table in the trading floor of the Indonesia Stock Exchange (IDX). (thejakartapost.com/Wienda Parwitasari)
T
he effect of a possible “Brexit” – the UK’s plan to withdraw from the EU – and the US Federal Reserve’s benchmark interest rate hike will affect the bond market more than equities, according to the Indonesia Stock Exchange (IDX) director.
The increase in the reserve’s fund rate will be followed up by the US treasury, depleting the interest rate spread provided by local bonds, while market worry on a Brexit will have less of an effect on Indonesia as it will only cause global investors to shift from UK bonds to other safe markets.
"However, we have to see the effects on the exchange rate. If the rupiah’s value gets stronger, Indonesian securities will be more expensive for foreign buyers," IDX director Samsul Hidayat told thejakartapost.com on Tuesday.
Capital flight on both debt and equity instruments, he continued, would only occur if the rupiah’s appreciation was significant. However it would be impossible to measure the exact effect of a Brexit on Indonesia.
"It takes a comprehensive mapping of British-based foreign assets, especially since it has not happened yet," Samsul added.
The reserve will hold a meeting on June 14 to 15. Meanwhile the UK will vote on its EU membership on June 23. The Jakarta Composite Index is still currently moving along at the psychologically comfortable level of 4,800. (ags)
