JCI Worst Performer in Asia

Photo by IDX

JAKARTA (TheInsiderStories)–The Jakarta Composite Index (JCI) fell the most among Asia Pacific markets today (13/8) driven by Turkey crisis and widening current account deficit (CAD).

On Monday (13/08), JCI closed down 3.29 percent or 200.13 points at 5,877.52 at the end of today’s trading, the lowest since November 11, 2016.

Singapore’s Straits Times Index fell 1.05 percent while Malaysia’s KLCI Index dropped 1.24 percent. In addition, Tokyo’s Nikkei 225 plunged 1.98 percent, Hong Kong Han Seng decreased 1.52 percent, and Shanghai Composite down 0.34 percent.

Fears on the domino effect of the Turkish crisis is the main trigger of today’s JCI weakening. The Turkish lira depreciation against US dollar pushed investors to divert their assets to safe havens. As a result, it pushed the emerging market’s currencies and equities into the red including Indonesia.

Lira has lost more than 45 percent of its value for this year and fell 18 percent August 10, 2018, the worst since 2001. The lira depreciation largely due to concern on Turkey President Recep Tayyip Erdoğan’s influence over the country’s economy, calls for lower interest rates in the face of high inflation, and worsening relations with the United States, according to Reuters.

Turkey‘s fundamental economy also in alarming condition reflected by the country’s CAD that rose to US$57.4 billion by August 2018. It worse to US$33 billion in 2016 and US$47.4 billion in 2017.

Furthermore, JCI weakening also driven by the country’s widening current account deficit. According to the Bank Indonesia, CAD in the second quarter of this year recorded 3 percent of gross domestic product (GDP) or US$8 billion, the highest since the second quarter of 2014.

It widened from 2.2 percent of GDP or US$5.7 in the first quarter of this year and 1.9 percent of GDP or US$5 billion in the second quarter of 2017. The country booked a CAD of 2.6 percent of GDP accumulatively in the first half of this year.

The widening CAD was mostly pushed by an increase in trade deficit at US$1.33 billion in April to June 2018 due to high import of consumer goods and raw materials.

The CAD factor will still overshadow JCI as the Bank Indonesia estimated it would not improve in the third quarter of this year. But Bank Indonesia Deputy Governor Dody Budi Waluyo ensured it will improve at the end of the fourth quarter this year.

Bank Indonesia projected CAD to be below 3 percent of GDP throughout 2018.

Waluyo said the central bank and government have committed to maintain CAD, of which by boosting export and reducing import. “I am sure the government will be serious in this issue,” he added.

Meanwhile, National Development Planning Minister Bambang Brodjonegoro said the government will boost the biodiesel implementation in order to reduce oil and gas imports which has a significant contribution to the trade deficit.

Indonesia booked US$2.7 billion in oil and gas trade deficit in the second quarter of this year, the highest since 2015. The country recorded US$7.2 billion in oil and gas import, significantly higher than US$4.4 billion in oil & gas export in the second quarter of this year.

In addition, Brodjonegoro added the government will reduce infrastructure projects that need high imported raw materials in order to maintain CAD.

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