Indonesian Stock Market Prone to Correction After Long Holiday

STOCK MARKET - JAKARTA. Following a surge in the lead-up to the Eid holiday, the Composite Stock Price Index (IHSG) is projected to adjust to market conditions over the past week on Tuesday (16/4).

The IHSG was known to have strengthened by 0.45% or increased by 32.48 points to 7,286.88 at the close of trading on Friday (5/4).

MNC Securities analyst Herditya Wicaksana reported that over the last week before the long holiday, the IHSG corrected by 0.03% accompanied by a purchase volume or outflow of IDR 6.2 trillion across the market. The IHSG was able to close above the 60-day Moving Average (MA) on Friday (5/4).

He explained that the IHSG movement is shadowed by several sentiments. Among them, the weakening exchange rate of the rupiah against the US dollar. Then, the strengthening trend of global commodity prices, affects correlated issuers.

According to him, the movement of global commodity prices will be influenced by the release of Non-Farm Payroll (NFP) data and inflation in the United States (US) and China.

The IHSG is expected to experience limited strengthening with support testing at 7,261 and resistance at 7,309 in the first trading session after Eid, Tuesday (16/4).

Meanwhile, Equity Research Analyst at Phintraco Securities, Valdy Kurniawan, predicted that the IHSG will weaken on the first day after the long Eid holiday. The support test, according to him, will be at the 7,175 level and resistance at 7,300.

"The market is expected to adjust to developments that have occurred over the past week," Valdy told Kontan on Monday (15/4).

Several sentiments will affect the market. According to Valdy, the main sentiment is the strengthening of the USD Index. This condition has the potential to trigger a significant weakening of the rupiah exchange rate on the first trading day, Tuesday (16/4).

This is due to a shift in market expectations for a cut in the benchmark interest rate by the Fed over the past week. The CME FedWatch Tools recorded the chance of a benchmark interest rate cut at the Federal Open Market Committee (FOMC) in June 2024 remaining at 26.9% from the previous week above 60%.

The next sentiment comes from Israel, which is anticipating a potential direct attack from Iran. This could be the biggest escalation since the intensification of the Israel-Palestine geopolitical conflict in October 2023. This condition is considered to trigger a rise in energy commodity prices, especially oil, over the past week.

The above escalation has the potential to push oil prices up to above the psychological level of US$ 100 per barrel shortly.

This also has implications for Wall Street indices, which are pressured by concerns about the delay in cutting the benchmark interest rate by the Fed in 2024.

Meanwhile, indices in Europe tend to be sideways. Concerns about inflation spikes and delays in cutting the benchmark interest rate are offset by rising commodity stock prices in Europe. The rise in oil prices is also considered to trigger a rise in energy company stock prices, especially oil producers.

The last sentiment comes from economic data, where market players are awaiting retail sales data and the property price index in the US.

According to Valdy, rate-sensitive stocks, especially banks, property & real estate and automotive should be wary this week. Conversely, more defensive stocks, such as consumer-related and infrastructure (telecommunications) can be observed this week.

Meanwhile, Herditya is observing the following stocks, among them, ASSA with a target price of IDR 860 - IDR 900, DOID around IDR 450 - IDR 460, and INCO at IDR 4,220 - IDR 4350.