JCI on focus: eyes on rupiah and inflation

The JCI dropped 3.9 percent last week to 4,209.44, along with US' Standard & Poor’s 500 Index which lost 1.4 percent. The momentum for technical rebound is opened awaiting for the firmer action in guarding the rupiah and the economy.

Head of Research at NH Koorindo Securities Reza Priyambada said the investor would wait for the September inflation data release next week, while at the same time focusing their attention on the rupiah volatility.

The stable inflation will not necessarily lead to higher Indonesia's benchmark interest rate, which may prevent the rupiah from depreciating further. The room for such increase is limited amid the rising credit risk in the banking industry, and shrinking foreign reserve.

“The question now is how the central bank and the Finance Minister are able to maintain rupiah from depreciating further. Bank Indonesia’s ammo is limited, shrunk more than US$2 billion in the last 2 months. What Finance Minister as the fiscal authority can do about it?” he told thejakartapost.com, on Sunday.

The investors, he continued, need an assurance that fiscal policies aimed to boost the economic growth were seriously implemented with much firmer steps. “For example; the stimulus to boost industry must be announced clearer, and the infrastructure spending must be disbursed faster.”

That, he further said, would give assurance and optimism in the equities market, which in turn might open more room for the market rebound for the next week and the mid-term.

Yellen's confirmation

Senior Research at HD Capital Yuganur Wijanarko said despite JCI’s last week decline, the market was quite contempt to have confirmation on this year’s planned Fed Fund Rate hike, from the Fed Chairman Janet Yellen’s in her latest speech on Thursday (24 Sept).

The global market sparked by Yellen’s reassurance that turbulence in emerging markets won’t harm growth in the U.S. The growing U.S GDP would means the Fed fund rate will be more likely to be increased in October or November, ahead of the scheduled December plan.

This month, her statement will be on a test as the final reading on the U.S second-quarter gross domestic (GDP) released. Uncertainties has led the US stock benchmark index tumbled 6.4 percent in the second quarter of 2015, headed for its worst quarterly performance in four years.

“We saw the process of JCI’s correction due to regional and rupiah pressure is a usual process to test the low point in the consolidating formation. We recommend the investor to accumulate [stocks] on weakness,” Yuganur said.

According to him, the market consensus showed that they bet the Fed increase to happen during the meeting in October by 50%. Amid the optimism in the global market, the JCI may rebound to test its resistance area at around 4,300.

Reza argued both options (the faster Fed Fund rate increase and the slower one) had the same impact to Indonesia; the short-term capital outflow from Indonesia market, and the long-term better export outlook.

In the short-term, the role of the central bank (Bank Indonesia/ BI) badly needed. But, according to Reza, the key is now in the hand of President Joko ‘Jokowi’ Widodo’s economy team.

They must be able to show positive signal to the market, that they work faster to maintain the economy, while the central bank's ability to intervene the market is getting limited. (Arif Gunawan S.)