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Coming Fed rate cut enlivens outlook on RI stock market
The local bourse has seen a general lifting in projections among global investment banks on the back of a stronger rupiah and expectations for a Fed rate cut before the year-end as well as fiscal discipline under the incoming Prabowo administration.
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A woman takes a picture of stock movements on July 4, 2023 at the Indonesia Stock Exchange (IDX) in Jakarta. (Antara/Hafidz Mubarak A)
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ajor global investment banks have lifted their projections for the Indonesian stock market in the coming months on the back of an increasingly possible rate cut by the US Federal Reserve (Fed) before the end of this year, as well as the improving rupiah exchange rate over the past months.
The same lenders also pointed to a reassurance linked to the incoming administration’s apparent commitment to fiscal discipline, but cautioned investors over the United States election in November, saying that its outcome could impact emerging market economies.
Henry Wibowo, head of Indonesia research and strategy at JP Morgan Indonesia, emphasized that the bank’s positive outlook on the domestic equity market and maintenance of its overweight rating signaled future expectations for the market’s better performance.
Speaking at a press briefing on Thursday, Henry said Indonesia was expected to benefit from upcoming cuts to the US’ federal funds rate (FFR), which would reduce pressure on local rates.
JP Morgan projected a FFR cut of 125 basis points (bps) between September and December, after which Bank Indonesia (BI) was expected to lower its benchmark rates by 50 bps.
“The shift could trigger a flow of funds to emerging markets like Indonesia,” Henry said.
