JCI Falls on Friday Amid Domestic Sentiment and Rupiah Concerns
Jakarta (ANTARA) – The Jakarta Composite Index (JCI) on the Indonesia Stock Exchange (IDX) opened lower on Friday amid investor concerns about the credibility of the domestic capital market and uncertainty over the direction of US Federal Reserve (Fed) interest-rate policy.
The JCI fell 31.12 points, or 0.61 per cent, to 5,066.94 at the opening on Friday.
Maximilianus Nico Demus, Associate Director of Research and Investment at Pilarmas Investindo Sekuritas, said in a research note in Jakarta on Friday that the MSCI issue continued to weigh on market participants’ and investors’ confidence.
The pressure had earlier been reflected in a 3.49 per cent decline in the JCI. At the same time, bond yields rose to as high as 7.64 per cent.
Domestic financial-market sentiment was also affected by concerns that potential foreign capital outflows could put pressure on the rupiah.
Hashim Djojohadikusumo, Chairman of the Advisory Board of the Indonesian Chamber of Commerce and Industry (Kadin), had previously warned that the rupiah could weaken to Rp20,000–Rp22,000 per US dollar if the capital-market issue related to the MSCI review was not resolved promptly.
“Hashim’s statement about the rupiah potentially weakening to Rp22,000 per US dollar reflects the scale of investor-confidence risks facing the domestic financial market, particularly amid uncertainty over Indonesia’s status in the MSCI index,” Maximilianus said.
Although Bank Indonesia (BI) Governor Destry Damayanti responded by saying that Indonesia’s economic fundamentals remained relatively sound, investors continued to watch for further rupiah weakness.
“We expect BI’s efforts to support the rupiah to remain a priority, by optimising market intervention and monetary instruments without having to raise the policy rate immediately,” he said.
Maximilianus said the effectiveness of those measures would also depend on resolving capital-market transparency and governance issues in order to restore foreign investors’ confidence.
Therefore, the risk of rupiah depreciation is determined not only by external factors, but also by the credibility of domestic financial-market reforms.
Alongside domestic sentiment, market movements were clouded by developments in the US economy, particularly rising inflation, which could influence the Fed’s monetary-policy direction.
Pilarmas noted that the US Personal Consumption Expenditures (PCE) price index rose from 3.4 per cent to 3.6 per cent year on year.
Meanwhile, consumer spending growth slowed from 0.9 per cent to 0.5 per cent.
Rising inflation amid slowing consumer spending has added to uncertainty over the US interest-rate outlook. This could put further pressure on global financial markets, including Indonesia’s.
With this combination of domestic and external factors, Pilarmas expects the JCI could continue to fall in Friday’s trading. Its technical analysis puts support at 4,815 and resistance at 5,185.