JAKARTA. Since September 2016, foreign investors recorded a worth of Rp 20.14 trillion net sell in Indonesia Stock Exchange (IDX).
Meanwhile, the foreigners ownership of government bonds also shrank by Rp 24.23 trillion from Rp 684.98 trillion at the end of September 2016 to Rp 660 trillion as of 6 December 2016.
Those were caused by the stronger US dollar. “Foreign investors predict that the US dollar will become stronger so that they sold their assets in Indonesia,” said the Head of Research at Daewoo Securities Taye Shim, Wednesday (7/12).
The stronger US dollar was also driven by the Trump’s effect with the tagline of "Make America Great Again". In other words, Trump is likely to boost the stimulus for corporations’ activities.
Trump also tends to be more protective against global market, as well as to change the focus from monetary policies to fiscal policies. These have led to speculation in global market and to a stonger US dollar since Trump was elected as the president of the US.
Analyst at Valbury Asia Securities Nico Omer added that the foreigners preferred to choose the safe haven assets rather than risky assets such as shares in development countries. On the other hand, the Jakarta Composite Index (JCI) has been skyrocketing since the recent months. “Therefore, the index valuation has been high,” Nico said.
According to Bloomber’s data, the price earning ratio (PER) of the JCI was higher than other stock exchanges in the region. The PER of JCI was 24 times, while the PER of SET (Thailand) and Shanghai were 18 times and 18 times, respectively.
The worst scenario may happen. Nico said that the current net sell is repeating the condition of the last year when the JCI was back again to the zone of 4,000. However, currently the foreigners’ net sell is higher. “JCI will likely to hit the level of 4,000 before heading to the level of 6,000 in 2018,” Nico predicts.
Nico also estimates that the condition may sustain until the first quarter of 2017. Subsequently, the foreigners will likely be back to emerging markets.
Taye added that Trump’s policies will likely be focusing on providing stimulus to boost the economy. However, Trump tends to adopt fiscal approach instead of monetary approach. This will be taken when the US has reached the full employment condition. “It’s like pouring fuel on the flames,” Taye said.
The implementation of fiscal policies during the full employment condition may lead to a high inflation. “As the results, The Fed will increase the benchmark interest rates earlier than expected,” Taye said.
The global macro conditions, including in Indonesia, will be affected. Taye revised down the prediction on economic growth in 2016 and 2017 from 5% and 5.1%, respectively, to 5.2% and 5.4%, respectively.
However, this is not a ‘dooms day’ for the JCI. Tracing back, the JCI’s growth was in the opposite direction to economic conditions, particularly during the contraction. (Muhammad Farid/Translator)
