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Jakarta Post

ECB stimulus fresh breeze for Indonesia

  • Tassia Sipahutar

    The Jakarta Post

Jakarta   /   Sat, January 24, 2015   /  11:27 am

Indonesian financial authorities welcome the European Central Bank'€™s (ECB) move to implement its own stimulus as it is expected to be a significant factor for boosting the global economy.

Finance Minister Bambang Brodjonegoro said late Thursday that the ECB'€™s quantitative easing (QE) would provide a monetary stimulant to the global economy, including to emerging markets such as Indonesia.

'€œThis is helpful amidst the US'€™ tightening policy and planned rate increase. For Indonesia, the European QE can help us pass through uncertain moments such as the one we'€™re in now,'€ he said.

Bambang referred to the past one-and-a-half-year period that the country has been going through since the US'€™ Federal Reserve announced its plan to cut back its own stimulus.

Bank Indonesia (BI) Governor Agus Martowardojo voiced a similar opinion, saying that the ECB'€™s QE was a positive move. However, he said that the central bank would pay higher attention to possible changes in investors'€™ appetites in response to the news.

'€œWe should include [the stimulus] as a preamble to determine the risk-on risk-off situation and to continue monitoring the rupiah'€™s movement,'€ he said.

In a press statement published Thursday, the ECB said that it would embark on an expanded asset purchase program, in which it would add the purchase of sovereign bonds to its existing private sector asset purchase program.

'€œThe program will encompass the asset-backed securities purchase program [ABSPP] and the covered bond purchase program [CBPP3], which were both launched late last year. Combined monthly purchases will amount to ¤ 60 billion [US$67.40 billion],'€ it said.

The purchases will be carried out at least until September 2016, or until the ECB'€™s governing council sees a sustained adjustment in the region'€™s inflation rate. The ECB expects to see the rate rise to close to 2 percent in the medium term.

Asian stocks, including those in emerging markets, rallied following the ECB'€™s stimulus announcement. Bloomberg reported that the MSCI Emerging Markets Index advanced for a fourth day, rising 0.9 percent to its highest level since Dec. 9.

The Jakarta Composite Index (JCI) was among those that ended in the black on Friday, up 1.3 percent to 5,324.885 from the previous day: the JCI'€™s peak so far this year. The Indonesian Stock Exchange (IDX) reported a net buy of Rp 1.61 trillion ($129.51 million) throughout Friday, overturning the Rp 249.8 billion-worth of net sell the IDX recorded the day before.

Meanwhile, Bank Internasional Indonesia (BII) economist Juniman insisted that Indonesia must make the best use of the ECB'€™s quantitative easing momentum.

'€œThis is a good opportunity to attract European investors. The government may hold investment forums in Europe to get them to invest here, including in various infrastructure projects,'€ Juniman said.

To cater to portfolio investors, he said that the government could introduce new capital market instruments, such as infrastructure-based Islamic bonds, or extend the series of its regular debt papers.

Separately, Bank Central Asia (BCA) economist David Sumual said that he expected to see higher capital inflow into the Indonesian bond market.

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