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Jakarta Post

Indonesian stocks open deep in red as Fed makes second emergency rate cut to zero

  • Riska Rahman

    The Jakarta Post

Jakarta   /   Mon, March 16, 2020   /   11:59 am
Indonesian stocks open deep in red as Fed makes second emergency rate cut to zero IDX logo in front of a giant screen that displays information of the movement of stock prices at Indonesia Stock Exchange (IDX), Jakarta, on Friday, March 13, 2020. (JP/Seto Wardhana)

Indonesian stocks were off to a bad start on Monday, plunging more than 2 percent at opening following the US Federal Reserve's announcement of a second emergency rate cut and a spike in the number of confirmed COVID-19 cases in Indonesia.

Meanwhile, the rupiah fell further on Monday morning to Rp 14,865 per US dollar, depreciating 0.59 percent to a level unseen since November 2018.

The Jakarta Composite Index (JCI) opened 2.7 percent down to 4,775.14, with 140 stocks falling and only 23 stocks gaining strength. It had fallen to more than 3 percent by 10:47 a.m. in Jakarta as foreign investors dumped Rp 34.73 billion (US$2.33 million) of stocks, more than they bought.

All nine sectoral indices of the bourse recorded declines at the start of the trading week, led by a 5.23 percent slump in infrastructure, followed by 4.03 percent in basic industry and 3.98 percent in the finance sector.

Shares in state-owned Bank Mandiri (BMRI) dropped more than 5 percent, while diversified conglomerate PT Astra International saw its shares slip almost 3.5 percent and shares in private Bank Central Asia (BBCA) dropped more than 2.5 percent.

Read also: Indonesia deploys second stimulus amid market, rupiah routs

Artha Sekuritas analyst Dennies Christopher said the downtrend was influenced mainly by extreme global uncertainties.

“It would have also been affected by market players’ concerns over the Fed emergency rate cut [this morning],” he said.

The Fed announced on Sunday evening (Monday morning in Jakarta) another emergency rate cut for its benchmark to a target range of 0 percent to 0.25 percent. The US central bank said it would also buy at least $700 billion in government and mortgage-related securities in the coming weeks.

“This is dramatic action and truly does represent a bazooka,” said Nathan Sheets, the PGIM Fixed Income chief economist who helps manage $1.3 trillion in assets, Reuters reported. 

Sheets emphasized, however, that investors wanted to see more US fiscal stimulus put to work and evidence that the Trump administration was responding vigorously and effectively to the public health challenges posed by the COVID-19 outbreak in the US.

“The performance of the economy and the markets will be mainly determined by the severity and duration of the virus’ outbreak,” he said

Markets in Asia also fell deeper into the red on Monday: Shanghai had slipped 0.48 percent, Hong Kong dropped 1.96 percent, Singapore fell 2.86 percent and Sydney nosedived 6.92 percent by 10:42 a.m.

Following the Fed’s move, the Reserve Bank of New Zealand also slashed its official cash rate by 75 basis points to 0.25 percent as it prepared for a “significant” impact on the economy from the pandemic, Reuters reported.

Read also: What central banks did last week as COVID-19 spread hit global markets

The pneumonia-like illness, called COVID-19, has spread to more than 169,000 people worldwide with at least 6,500 related deaths.

Indonesia has announced 117 confirmed cases and five deaths to date on Sunday afternoon, when the President called for a nationwide policy of social distancing.

Dennies expected that Monday's movement on the JCI would be affected by pressures to sell, but this could still be offset by the planned stock buyback of several listed companies if they had been carried out.

He expected that the index would remain in the bearish territory of 4,531 to 5,127 during the trading day on Monday.