JAKARTA (TheInsiderStories) – The release of two major data of Indonesia’s trade balance and foreign debt have spurred the negative sentiment to the movement of the Jakarta Composite Index (JCI) on Friday (16/3), according to Binaartha Securities analyst Reza Priyambada.
JCI plunged 0.27 per cent to 6,304.95 points, dragged by State-Owned Enterprises (SOEs)’s shares sell out on Friday’s first session trading.
“It is expected that global conditions can diminish its negative sentiment so that JCI can find the momentum of upside reversal,” said he said.
The first sentiment is Statistics Indonesia’s release about trade balance. On Thursday, the country still recorded trade deficit of US$120 million in February. Indonesia has been recording trade deficit three months in the row, after deficit of $220 million in December 2017 and a $676.9 million deficit in January 2018.
The second sentiment, Indonesia’s foreign debt reached $375.5 billion in late January or a 10.3 per cent growth compared to the same month last year, Bank Indonesia (BI) said on Thursday. The central bank added that the increase in foreign debt was mostly used to finance infrastructure projects and other productive activities.
It said the government and BI debts reached $183.4 billion, while the debt of private companies reached $174.2 billion. The majority of government debt ($180.8 billion) was in the form of debt papers, while the remaining debts ($55.7 billion) were loans from foreign creditors.
The amount has risen a warning for government to lower the dependency of external debt since it can harm the stability of the national financial system when the sudden global volatility occurs.
Apart from domestic sentiment, concerns of global market participants on the determination of tariffs on steel imports in the United States (US) drove the global index weakened and the impact on the rate of JCI.
Asian stock markets have slipped in early trade on concerns about the US investigation into the Trump Organisation and continuing fears of a global trade war.
Needless to say, the central bank should closely monitor developments in the foreign exchange market, given the uncertainty in the global economy and the risk of sudden massive capital outflows caused by the upcoming Fed fund rate rise, and conduct measured market intervention only to restrain extreme volatility.