The Jakarta Composite Index (JCI) has stopped moving from Monday, June 3rd until Friday, June 7th as Indonesians celebrate Eid Al-Fitr and the market closes for the week and will begin to open on Monday (10/6). In relation, JCI in their last day of operations on Friday (31/5) before the Eid Al-Fitr week was steadily improving and closed for 1,72% to the level of 6.209,12. As the financial index stopped moving, it was projected that the index and Rupiah would have continued to strengthen during the week if it was opened, providing positive promise to the financial sector as it opens again next week, because of several signals in the international and domestic financial weather.
Domestically, during Eid celebrations, the level of consumption has increased in significance. People’s purchasing power has increased due to the allocation of holiday allowances, so that people tend to make cash withdrawals to buy Eid Al-Fitr necessities. This is a positive catalyst that is expected to sustain domestic economic growth. Within a week, the JCI rose 3.95%, indicating that market participants were still confident of Indonesia's long-term stability despite the recent political demonstrations that followed after the presidential election. According to PT Artajasa Pembayaran Elektronis as the administrator of ATM Bersama, the transactions growth of this year has hit the highest record during the holiday. Daily transactions have increased by 70%, whereas interbank transfers increased by 60%, to an amount of Rp60 Trillion. Increase of usage in the banking and financial services will bring better performance and revenue for a lot of companies in the market, especially those in banking and finance sectors, providing a huge boost to the JCI.
Internationally, all major stock exchanges in the Asian region are now traded in the green zone during the week: Nikkei index goes up by 1,65%, Shanghai index goes up by 0,29%, Hang Seng index goes up by 0,89%, and the Kospi index goes up by 0,47%. The main Asian stock markets managed to follow in the footsteps of Wall Street which also posted a gain in Tuesday’s trade (4/6). Optimism that the Federal Reserve as the US central bank will cut its benchmark interest rate is a factor underlying the buying action on Wall Street and the Asian stock exchange. Fed Governor Jerome Powell signaled a cut in the benchmark interest rate by changing his reference standard because he himself did not know how and when these issues would be resolved. The President of the Fed of St. Louis, James Bullard said that the reduction in the benchmark interest rate might need to be done immediately. Based on the price of the Fed Fund futures contract as of June 4, 2019, the probability that the Fed will cut its benchmark interest rate by 75 bps this year is at the level of 31.3%. All in all, as international and domestic signals show a positive financial climate for firms and consumers alike, it is expected that by Monday (10/6), the JCI will continue its upswing from the previous week.
Sources:
Bisnis Indonesia
CNBC Indonesia
Financial Times
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