JAKARTA (TheInsiderStories) – Good morning. The government’s decision to reverse fuel price hike, just hours after it was announced, created confusion and uncertainty with motorists were seen crowding gas stations to fill up their fuel tanks before price is getting more expensive.
The Energy and Mineral Resources Minister Ignasius Jonan was the one who announced that the price of regulated RON 88 gasoline by around 7 percent to Rp6,900-Rp7,000 per liter effective at 18.00 local time on Wednesday (10/10). The decision came after state-owned energy producer PT Pertamina announced a hike in the price on unregulated gasoline and diesel fuel earlier in the day.
Then, Jonan announced a reversal in the hike, citing that Pertamina was unprepared to socialize the new price throughout its gas stations across Indonesia. Later, an official from the state enterprises ministry said a price hike will have to go through deliberations via the Coordinating Minister for Economic Affairs.
The policy flip-flow will create confusions among market participants who generally shared the view that hiking the price of gasoline will help Indonesia to lower its current account deficit and external pressures.
On the other side, however, hiking the price of fuel is never a popular policy especially with the election due next year. Furthermore, it will push inflation rate higher which will then affect Indonesia’s tepid economic growth.
Fuel price hike will help to ease pressures on the Rupiah, which made its first gain on yesterday after six straight days of losing streak. The Rupiah ended at 15,215 per US$1 versus 15,233 per US$1, according to Bank Indonesia’s reference rate.
While, stock market continued to make gains despite foreign investors were pulling out their funds from the equity market. The Jakarta Composite Index rose 0.4 per cent to 5,821. Foreign investors net sold stocks worth Rp575 billion (US$39.65 million).
Domestic investors stayed bullish on the stock market on expectations for strong corporate earnings for the first nine months period. Specifically, Wednesday’s gain was supported by strong appetite for stocks of two newly-listed companies, PT Jaya Bersama Indo (IDX:DUCK) and PT Garudafood Putra Putri Jaya (IDX:GOOD).
Foreign investors’ primary concern remains the rising yield of US treasuries which strengthened expectations for more rate hike by the US Federal Reserve. The rising yield also triggered risk-off sentiments in the stock market, with the Dow Jones dropped by more than 3 per cent in the first trading session.
Political tensions are heating up with both camps throwing jibes into one another. The opposition camp used the price hike of unregulated fuel, and initially the RON 88, was a point of attack. The Rupiah’s depreciation is also still in its repertoire.
The ruling coalition may score some points from the new government regulation which rewards those reporting corrupt practices with cash as much as Rp200 million. The regulation will certainly boost the incumbent President Joko Widodo’s anti-corruption agenda.
Furthermore, the government is expected to end the emergency statues for regions in Central Sulawesi destroyed by earthquakes and the subsequent tsunami. According to the latest count, the twin disaster had killed 2,045 people so far.
May you have a profitable day.
TIS Intelligence Team