JAKARTA (TheInsiderStories) – Jakarta Composite Index (JCI) is still likely to break the 6,000 level amid the volatility of the Rupiah, a casualty of global sentiment. Asian shares were a tad firmer on Thursday, taking their cues from strong U.S. data, although holiday-thinned trade and uncertainty about the impact of recent hurricanes on the U.S. economy are likely to keep investors wary.

The pace of the Rupiah’s strengthening faltered today, as it weakened three points, or 0.02 percent, settling at Rp 13,480 per U.S dollar, after local currency managed to rebound yesterday, post-fall to its weakest position in the last 10 months, at Rp 13,542 per U.S dollar.

However, the Rupiah began to run out of steam this morning. Against this, the muscle of the dollar once again became apparent, reflected in the spot dollar index rising to 93.51 from yesterday’s close of 93.45.

It’s no wonder the majority of Asian currencies are swooning versus the greenback. In addition to the Rupiah, the biggest weakness hit Thailand, the Philippine Peso and the Indian rupee. Only, the Korean won and the Japanese yen stayed thin against the US dollar.

The Indonesia Stock Exchange (IDX) noted that investors booked transactions amounting to Rp6.03 trillion with a volume of 8.21 billion shares . Meanwhile, trading in the regular market today, foreign investors recorded a net sale of Rp471.19 billion.

Although foreigners are still trending to sell, this is offset in an increase in the forex market, where the Rupiah strengthened amid rising bond prices. This selling action leverages the rise in prices of almost all shares.

Several analysts see the JCI and Rupiah as still having a window to get going stronger, amid global market volatility. An analyst of Binaartha Parama Securities, Reza Priyambada stated that the JCI is again vulnerable to weakening and sliding downward.

The current strengthening is considered a temporary increase because its resistance still has to be tested before it strengthens again.

“There is still high volatility and vulnerability and rapid rotation in the market, causing market players, especially foreigners, to back out and choose more stable instruments,” said Priyambada.

An analyst of Indosurya Sekuritas, William Surya Wijaya, observed how the JCI reaching 6,000 was strongly influenced by economic data that has been announced, such as controlled inflation, Indonesia’s trade balance surplus, Indonesia’s rising foreign exchange reserves and relatively stable Rupiah movement, all factors that maintain investor optimism.

He added that one example of the information being anticipated by the market today is the economic data on consumer confidence index in September 2017.

“The rising data could push the JCI to continue strengthening again,” he added.

He expects that the positive domestic sentiment could trigger foreign investors to re-enter the stock market, thus encouraging the JCI to record better performance. Reliance Securities analyst Lanjar Nafi added that the JCI has gained strength, led by mining stocks and followed by shares of agriculture and property sectors.

“Investors’ view of the prospects of a mining issuer is quite positive after the government’s plan to relax the tax rate on miners’ income taxes,” he said.

On the moeny market, Valbury Asia Futures Analyst Lukman Leong today rated the movement of Rupiah as influenced by the announcement of U.S economic data. This could make the US dollar exchange rate strengthen again, he said.

Therefore, Lukman predicts, the Rupiah will return the correction and move in the range of Rp 13,450-Rp 13,530 per U.S dollar. Head of MNC Securities Research Edwin Sebayang have other view, the performance of issuers that heavy into exports will actually be helped by a weak Rupiah.

For example, listed companies engaged in the coal business, crude palm oil (CPO), as well as some metal and mineral issuers, such as gold and tin. Mining shares that can be cultivated include ITMG, ADRO, HRUM, INCO, TINS ​​and ANTM. The basic industry sectors that export a lot of products abroad, such as SRIL, can also reap the benefits of a cheap Rupiah.

Rupiah Movement

Nevertheless, the weakening of the Rupiah negatively affects most issuers in the stock market. The reason is that currently the companies in the country are more biased as importers.

In addition to companies that use imported raw materials for operations, issuers who are heavily indebted in foreign currency will also be hit. Several publicly-listed companies that use imported raw materials are issuers – pharmaceuticals, steel, automotive and construction companies come to mind.

For instance example, one of the companies that will be harmed most is ASII, as it imports raw materials and is highly dependent on the position of the Rupiah against the US dollar. In addition KLBF also has the potential to print exchange rate losses if the Rupiah continues depressed.

About 40 percent of the needs of the construction of property and construction companies are still imported. But there are still construction stocks such as PT Wijaya Karya Tbk (IDX: WIKA) and PT PP Tbk (IDX: PTPP) that are interesting to be collected.

According to the World Bank, as quoted by Bloomberg, Indonesia, Malaysia, Thailand and Philippines remain more exposed to exchange-rate risk than other developing economies in East Asia and the Pacific, as global financial conditions tighten up.

Companies and banks in these countries have sizable external debt, although foreign-exchange reserves currently appear adequate, the Washington-based multilateral lender said yesterday, in its annual economic outlook report. Monetary authorities need to be prepared to tighten their policy stance if capital outflows prompt currency weakness, the report said.

Writing by Elisa Valenta and Linda Silaen, Email: elisa.valenta@theinsiderstories.com and linda.silaen@theinsiderstories.com

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