Economist Says JCI Strengthening Depends on Government Bond Yields

Head of Research and Chief Economist at PT Mirae Asset Sekuritas Indonesia, Rully Arya Wisnubroto, assessed that the movement of government bond yields is one of the key factors influencing the strengthening trend of the Jakarta Composite Index (JCI). He explained that the sustainability of the JCI’s positive trend is heavily influenced by several macroeconomic indicators that are the focus of investors, particularly the rupiah exchange rate and the movement of government bond yields. “If the rupiah is able to sustain its strengthening and the 10-year SBN (Government Securities) yield declines gradually from its peak level above 7.3% towards a lower range, Indonesia’s risk premium will decrease,” he said in an official statement received in Jakarta, Tuesday (16/6). “This condition will open up room for the return of foreign capital inflows into both the bond and stock markets,” Rully continued. Over the past week, the JCI has shown a consistent upward trend. On Tuesday (9/6), the JCI was at 5,344.69, then rose to 5,744.06 on Wednesday (10/6), increased further to 5,899.27 on Thursday (11/6), reached 5,960.27 on Friday (12/6), and closed at 6,118.73 on Monday (15/6). According to Rully, the current JCI strengthening is still driven by a technical rebound factor, which is also supported by Bank Indonesia’s (BI) more decisive monetary policy and the easing of global geopolitical tensions. Bank Indonesia itself raised its benchmark interest rate (BI-Rate) by 25 basis points to 5.50 percent on 9 June. On the other hand, news of easing conflict between the United States and Iran, which reportedly reached a peace agreement and will sign a Memorandum of Understanding (MoU) on 19 June, also provided positive sentiment for the market. These developments helped maintain the stability of the rupiah exchange rate and government bond yields, so that Indonesia’s fundamental economic conditions are considered better than several days prior. Nevertheless, Rully estimates that market participants will still observe the dynamics of global sentiment, the direction of monetary policy, and domestic financial market stability. He added that although improvements are beginning to be seen, investors are still waiting for stronger signals regarding the sustainability of the decline in risk premiums and rupiah stability before increasing their optimism in the market again. “Foreign capital flows still tend to be selective,” added Rully Arya Wisnubroto.