JAKARTA, KOMPAS – The Jakarta Composite Index (JCI), the main price barometer at the Indonesian Stock Exchange (IDX), rose 0.4 percent to close at 5,540 on Friday, its highest ever level.
The surge in the JCI was, among other factors, due to the reentry of foreign investors into the Indonesian stock market. This indicated that investors have become more confident in Indonesia’s economy following an improvement in the country’s macroeconomic data.
Throughout Friday, foreign investors booked net purchases of Rp 2.5 trillion. The trading volume was also quite large, with 12.47 billion shares changing hands at a transaction value of Rp 12.7 trillion, far above the average daily transaction value of Rp 8 trillion.
In the previous day, foreign investors booked net purchases of Rp 1.8 trillion. The foreign investors mostly bought banking shares, especially those of BRI, BCA, Bank Mandiri and BNI.
It was interesting to note because the JCI’s new record was achieved after the US central bank, the Federal Reserve (Fed), raised its benchmark interest rate by 25 basis points to a range of 0.75-1 percent.
"Concerns about the Fed’s rate hike have eased. US fiscal policy under President Donald Trump seems to be more realistic and pragmatic, easing investors’ concerns," the head of research at Mirae Asset, Taye Shim, said in Jakarta Friday.
The rise in the JCI was also supported by the stability of the rupiah exchange rate. The rupiah in the Jakarta Interbank Spot Dollar Rate (Jisdor) on Friday was relatively stable at the level of Rp 13,342 per US dollar, only slightly down from Rp13,336 per US dollar in the previous day.
In the spot market, throughout the week the rupiah continued to strengthen. During the week, the rupiah strengthened by 0.05 percent against the US dollar. The Indonesian currency has continued strengthening for two consecutive weeks in the spot market. At the close of Friday\'s trading, the rupiah exchange rate in the spot market strengthened to Rp 13,345 per US dollar.
Analyst at NH Korindo, Bima Setiaji, said the rise coincided with the surge in stock price indices in developing countries. "The Fed\'s interest rate increase is a sign that the US economy is improving. It has become the catalyst for the rise in stock price indices, including the JCI. In addition, the Fed\'s rate hike has also affected the global commodity markets. The price of energy commodities, such as crude oil, also rose," Bima added.
Calculated risks
In economic data from the US, weekly jobless claims fell by 2,000 to 241,000 and new jobs rose to 5.63 million. Chief economist at Samuel Asset Management, Lana Soelistianingsih, said that in the past, the increase in the Fed\'s benchmark often caused turmoil in financial markets. Now, the impact of the rate hike was different, because investors had already anticipated the risks arising from a rate hike so that it did not really affect the financial markets.
"Risks arising from the increase in the Fed\'s benchmark interest rate have been anticipated. For investors, certainty is very important. If the Fed raises interest rates, especially if it is within the consensus of economists, investors will be assured," Lana added.
Meanwhile, Taye said that the Indonesian stock market was at a stage of intermediate expansion. He expected the market still had the opportunity to grow further. The surge in the JCI was also supported by an improvement in the financial performance of publicly listed companies and low valuations. The improvement of macro-economic conditions also supported the increase in asset prices.
This has also been supported by improvements inthe consumer confidence index released by Bank Indonesia, which rose from 115.3 to 117.1 in February.
In the bond market, yields on the government’s benchmark bonds series FR0056 fell 6.2 basis points from 7.39 percent to 7.33 percent. The RI250115 global bond yields also dropped one basis point from 4.034 percent to 4.024 percent.
Credit rating
Another factor that is expected to become a catalyst for a further increase in portfolio investment will be an improvement in Indonesia’s sovereign debt rating from Standard and Poor\'s (S&P). The progress in fiscal reform will probably cause S&P to consider raising Indonesia\'s credit rating to investment grade this year.
CurrentlyS&P is the only agency that has not issued an investment-grade rating for Indonesia. Other ratings agencies, Fitch and Moody\'s, have both granted investment-grade ratings. They have also recently revised their outlooks to positive from stable. There is a possibility they will raise the ratings again.
As quoted by CNBC, economists and analysts feel that Indonesia deserves to get a higher rating. Luke Spajic of Pimco said the improvement in commodity prices would help increase the valuation of assets in Indonesia.
Chief economist at PT CIMB Niaga Adrian Panggabean said an increase in the credit rating from S&P would lead to a decline in bond yields and a rise in the price of bonds.
(JOE/AHA)
