JAKARTA. In the recent one week, Jakarta Composite Index (JCI) and rupiah exchange rate corrected by 2.48% and 0.85%, respectively.
The corrections were triggered by the capital outflow. In the recent one month, foreigners have booked a net sell of Rp 11 trillion in Indonesia Stock Exchange (IDX). However, the foreign investors still booked a net buy of Rp 7.6 trillion during the recent six months.
Not only IDX, other stock exchanges in South East Asia or SEA countries also experienced capital outflows. In Thailand stock exchange, foreigners booked a net sell of US$ 411.5 million, while the foreigners booked a net sell of US$ 257.66 million.
Analyst at Monex Investindo Futures Faisyal estimates that the weaker currencies have triggered the capital outflows from stock and bond markets.
Some currencies in Asia region tends to be suppressed after The Fed decided to increase its interest rate. The exchange rate of Malaysia’s ringgit dropped to the lowest level since 1998, following the correction in the local stock market.
The fall of Malaysia’s financial market was also driven by the growing political tension in the country. “Each country has different sentiments, while Indonesia’s economy tends to be stable,” Faisyal said.
The market participants moved their assets to the US (United States of America), mainly in the forms of government bonds and currency, due to the stronger US dollar. The investors avoided the emerging markets due to the lower yields. Furthermore, the profit taking ahead of the end of year is also a reason for foreigners to temporarily leave the emerging markets.
Analysts estimate that the foreigners’ net sell will continue, while the bonds in the US provide higher yields. However, the foreign investors will come back if the issuers and economic performances improve.
Let alone, Indonesia is still more attractive compared with other South East Asia countries. Aside of offering jumbo yields, Indonesia also offers other advantages, such as large populations and relatively stable political situations.
However, analysts also estimate the continued net sell will bring negative impact to rupiah exchange rate. Bank of Tokyo-Mitsubishi UFJ Ltd predicts that rupiah will depreciate to the level of Rp 13,700 per US dollar in the first quarter of 2017.
Standard Chartered Plc also predicts that rupiah will depreciate to the level of Rp 13,500 per US dollar in the first quarter of 2017. The depreciation may be driven by the potential of wider deficit in current transactions. (Muhammad Farid/Translator)
