JAKARTA (TheInsiderStories) – Trade war fears are still bring a negative sentiment to the market. This Friday, the European Union will impose import duties on United States’s (U.S) products in response to import tariffs for steel and aluminum starting June.
But, the Federal Reserve (Fed) governor Jerome Powell is still optimistic that further interest rate hikes remain on track. Along with it, today, Taiwan’s central bank will set a benchmark interest rate.
In the firs trading, the local stock market went down sharply. The Jakarta Composite Index (JCI) yesterday (20/6) closed down 1.83 percent to 5,884.04 from the last trading on June 8.
Tito Sulistio, President Director of the Indonesia Stock Exchange, acknowledged the decline in stock indices is the impact of sentiment from global markets, such as the Fed. He said, there is speculation in the market, the Fed’s interest rate policy will be followed by Bank Indonesia. The central bank may again raise its 7-day reverses rate (7-DRR) reference rate at BI’s Board of Governors Meeting (RDG) in late June.
On the other hand, he continued, long holidays become one of the JCI crushers. Over the past week, global negative sentiment has accumulated so the stock market recorded a significant drop. The local bourse authority also noted some negative sentiments, such as the development of trade war between the U.S and China which is heating up again.
Domestically, Indonesia’s foreign exchange reserves at the end of May fell to US$122.9 billion from the previous month’s US $ 124.9 billion. In addition, the trade balance in May also recorded a deficit.
However, Tito said investors should not worry. Because, fundamentally, companies in Indonesia tend to remain strong. Its reflected from some issuers who has plan to revise its target this year.
From the coal sector, PT Bumi Resources Tbk (IDX: BUMI) is targeting to increase its production target from 80 million tonnes (MT) of coal to 90 MT this year. Other miner, PT Delta Dunia Makmur Tbk (IDX: DOID) has almost surpassed this year’s new contact target of $7 billion.
From the telecommunications sector, PT Telekomunikasi Indonesia Tbk (IDX: TLKM) optimist its triple Play service’s IndiHome customers to exceed the original target of 4.7 million customers to around 5 million customers by the end of 2018.
Similarly, the largest micro lender PT Bank Rakyat Indonesia Tbk (IDX: BBRI) plans to increase its credit distribution target.The state-owned bank assure will hoist the target because the micro, consumer and medium sectors credit has so far grown significantly.
Indonesian economic growth has not fully reached the target of 5.3 percent. But it is higher than last year in the range of 4 percent. The Consumer Confidence Index also rose, at 125.1 in May 2018. This figure increased compared to April 2018 of 122.2. This raises new optimism for issuers to raise targets.
A number of factors also support these expectations. One of them is the distribution of holiday allowance from the government for civil servants and pensioners. Local elections are also taking place this year.
From here, the banking and telecommunication sector is still attractive in the second half of 2018. With this parameter we believed the index tends to move towards consolidation and has possibility to ended in the level of 6,100 to 6,200 in this year.
Meanwhile, Asian stocks move mixed today amid the global negative sentiment. This morning, Nikkei 225 index fell 0.10 percent to 22,532, Hang Seng Index rose 0.24 percent to 29,767, Taiex rose 0.44 percent to 10,975, Kospi fell 0.36 percent to 2.355, ASX 200 rose 0.87 percent to 6,226 and Straits Times rose 0.28 percent to 3,325.
U.S’s stock also moves mixed in midweek. On Wednesday (20/06), Dow Jones Industrial Average fell 0.17 percent to 24,657, S & P 500 index rose 0.17 percent to 2,767 and Nasdaq rose 0.72 percen to 7,781. Dow Jones recorded a decline in seven consecutive trading days.
In the local foreign exchange (FX) market, the main driver is still an external sentiment. On the other hand, market participants are starting to anticipate the possibility of BI re-raising interest rates at next week’s meeting. Thus, pressure on the rupiah will decrease. We assessed, today rupiah will moves in the range of Rp 13,900-Rp 14,100 per U.S dollar.
The worse impact showed in the commodity market. Today, gold price for delivery in August 2018 on the Commodity Exchange reached its lowest point at $1,271.20 per troy ounce. The price is down 0.26 percent when compared with yesterday. Gold prices corrected in three trading days with a large accumulation of 0.69 percent decline.
The same pressure also impact to the pcrude palm oil or crude palm oil (CPO) trading. The price of CPO again stranded to the lowest level. Yesterday, CPO price of September 2018 delivery contract on Malaysia Derivative Exchange fell 0.04 percent compared to the previous day to RM2,262 per metric ton.
This is the lowest price level of CPO since September 2016. In a week, the price has dropped 3.05 percent.
Trade war sentiment has put market conditions back in jeopardy with high volatility. We don’t know how long this dispute will ended. For the investors we recommend to be careful in investing in order not to lose money. Happy trading!