Finance Minister: Investors Remain Confident

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Foreign investors remain confident in Indonesia as reflected in the inflow of foreign funds to the financial market. However, global uncertainty has led to negative sentiment.

JAKARTA, KOMPAS — Investors remain confident in Indonesia\'s economic condition. Pressure is mainly caused by external factors, such as the slowdown in the global economy.

Investor confidence is reflected in, among other things, initial bidding for government foreign currency denominated bonds, which reached Rp 10.65 trillion since the beginning of the year. The value is higher than the Rp 5.75 trillion in the same period in 2018.

The Jakarta Composite Index (JCI), the main price index at the Indonesia Stock Exchange (IDX), rose 1.567 percent to 6,032,696 at the close of trade on Thursday. Since the beginning of 2019, the JCI has lost 2.81 percent. Even though foreign investors recorded net purchases of Rp 56.286 trillion since the beginning of 2019, they recorded net sales of Rp 546.2 billion in the stock market on Thursday.

The rupiah exchange rate based on the Jakarta Interbank Spot Dollar Rate was Rp 14,513 per US dollar, the weakest since Dec. 27, 2018. On Dec. 28, 2018, the rupiah exchange rate was Rp 14,542 to the dollar.

"Domestic economic indicators remain positive. The unrest has been very unfortunate, but the community and businesspeople are confident and believe that the Indonesian economy remains good," said Finance Minister Sri Mulyani Indrawati at a press conference following a meeting of the Financial System Stability Committee (KSSK) in Jakarta on Thursday.

Sri Mulyani said there was no surprise factor from the protests against the results of the 2019 election. Investors and economic actors had anticipated the situation. This was reflected in the financial system, which ran as usual and with quite a good performance despite the turmoil.

Regarding external factors, the government will try to reduce the impact of global pressure by maintaining people\'s purchasing power, inflation and the investment climate. Bank Indonesia Governor Perry Warjiyo said global factors were more dominant in influencing capital inflows and capital outflows on the bond market.

In the last two days, the net buying of foreign investors in the government bond market rose to Rp 1.7 trillion due to expectations of economic improvement. "Foreign capital will continue to enter the bond market," Perry said.

Regarding the rupiah\'s exchange rate, Perry said more exporters had sold the foreign exchange they received from exports on the foreign exchange market, helping to strengthen the rupiah against the US dollar. On the spot market on Thursday, the rupiah strengthened 0.43 percent and traded in the range of Rp 14,455 to Rp 14,465 per US dollar.

Sentiment

Financial Services Authority (OJK) chairman Wimboh Santoso said the fall in the JCI since April 2019 was mainly caused by negative sentiment resulting from global factors, such as the escalation of the trade war between the United States and China.

Separately, PT Bahana Sekuritas head researcher Lucky Ariesandi said the pressure on the financial market as a result of the unrest in Jakarta was temporary. Other factors, such as the US-China trade war and data on the domestic economy, would become the main drivers of the JCI\'s movement throughout the remaining months of the first half of 2019.

"Investor interest has not decreased. However, psychologically, during the 2019 election period, investors postponed their investment to wait for certainty from the new government\'s programs," Lucky said.

Meanwhile, Bahana Sekuritas economist Putera Satria Sambijantoro said the fundamentals of the Indonesian economy were still strong enough to attract foreign capital into portfolio investment. Market players remain optimistic that the government will able to maintain Indonesia\'s social and political stability.

According to Satria, the government needs to pay attention to the effectiveness of programs to reduce the current account deficit. (KRN/DIM)

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