S&P potentially upgrades Indonesia’s rating

JAKARTA. The international ranking institution Standard & Poor's is potentially to upgrade Indonesia’s debt rating to the level of investment grade.

As quoted by Bloomberg, DBS Group Holdings reported that S&P Global Ratings is considering upgrading Indonesia’s debt rating in this year.

The economist at DBS Group Gundy Cahyadi on a research released on Thursday (19/1) mentioned that some key factors, which withheld S&P to upgrade Indonesia’s rating, have been improved.

Those factors include the increase in non-performing loan (NPL) rate, due to the economic slowdown. In this case, S&P considered this as a risk factor. This year, the NPL rate has improved.

Meanwhile, the fiscal deficit also improved, following the increase in tax revenues in this year. S&P also considered that the government has appropriate strategies in utilizing the state budget of this year.

The status of investment grade has been long-awaited. As information, S&P is the only international ranking institution, which has not granted investment grade to Indonesia. Previously, other rating companies, such as Fitch Ratings and Moody’s have granted investment grade to Indonesia.

Last year, Indonesia failed to obtain investment grade level from S&P. This rating company maintained Indonesia’s debt rate with the score of BB+ and the positive outlook.

Analysts assessed that the investment grade will be positive sentiment for domestic stock exchange. In this case, the Jakarta Composite Index (JCI) has chances to book positive performance in this year of S&P grants investment grade to Indonesia.
Monitoring Trump’s economic policy.

In a short term period, the stock market might be affected by some sentiments from the US (the United States of America).

Head of Research at Erdhika Elit Securities Wilson Sofwan predicts that market participants will tend to adapt wait and see stance on Trump’s policies, mainly in economy. “Trump’s policies remain unclear. Hopefully, the policies will be clear this week,” he told KONTAN, Thursday (19/1).

Wilson predicts that market participants have anticipated Trump’s speech. Thus, if the US’ market negatively responses the speech and the US dollar depreciates, the local stock market will remain positive.

Markets are also waiting for Trump’s cabinet announcement and his programs. Head of Research at Koneksi Capital Alfred Nainggolan assesses, markets seem to have anticipated Trump’s economic policies. Therefore, the policies might not bring significant impacts to the markets.

Alfred predicts that the JCI will be stronger in the next week in a limited range. He predicts that JCI will be ranging from 5,270 to 5,360.

Meanwhile, Wilson predicts that JCI will be moving around 5,270-5,330 in a short term period.

Alfred said, with a better domestic prospect, investors may consider shares with book value under 1 but having solid fundamentals and sector, such as the shares of MEDC, ADRO, BBRI, and WSKT, while Wilson favors of AKRA, BBCA, CTRA, ICBP, INTP, SCMA, and TLKM’s shares. (Muhammad Farid/Translator)