Stock exchange facing uncertainty

JAKARTA. Terror actions have heated up global situations. The assassination of Russian ambassador to Turkey and Christmas market truck attack in Germany, which caused deaths of at least 12 people, have led to anxiety among market participants. This brought negative impacts to stock exchange, since market players preferred to shift to safe haven assets, such as the US dollar.

The global situations have also affected to Jakarta Composite Index (JCI). On the last Monday, JCI dropped by 0.76% to 5,191.91. Analyst at Binaartha Parama Securities estimated that the case of the murder of Russian ambassador to Turkey has brought indirect effects to Indonesia.

The anxious investors have preferred to shift their assets to safe haven assets, such as the US dollar, due to increasing instability.”A stronger US dollar will lead to a weaker rupiah,” Reza said.

If rupiah exchange drops, JCI will tend to move slower. Let alone, the second phase of tax amnesty has not brought positive sentiment to stock exchange.

However, analysts estimated that the terror attacks will not affect to JCI in a long term. Analyst at Millenium Danatama Sekuritas Muhammad Al Amin said that the JCI movement is affected more by the increase in The Fed’s funds rate (FFR). The increase in FFR has caused the prospect of investment in the US to become more attractive. As a result, hot money will flow to the US.

Analyst at Lautandhana Securindo Khrisna Setiawan said that the flow of hot money is a significant factor, which may cause the index move slowly.
As information, Dow Jones Industrial Average (DJIA) has reached the highest level ever in history that is 19,974.62 on Tuesday (20/12).

Indeed, the high potentials of yields are attractive for the investors. “Asia’s stock exchanges will be affected, as foreign funds will move out from the emerging markets,” Amin told KONTAN, Thursday (22/12).

However, Amin estimates that the regional investors still prefer to invest in Asia’s markets, on the grounds that the interest in Asia is higher than in the US.

Head of Research at Universal Broker Indonesia Satrio Utomo said that the increase in FFR offers higher profits for the investors. Let alone, FFR is potentially to increase in three more times in the next year.

Window dressing at the end of the year may take place in the US. “Markets are adopting wait and see stance, and everything is still processing,” Satrio said.

According to Satrio’s analysis, JCI is decreasing with a potential correction to the level of 4,800. The worst scenario is that JCI will move out from the psychological level of 5,000 on today’s trade. However, he is still optimistic that the JCI may be closed at the level of 5,200 at the end of the year.

Meanwhile, Reza has a more pessimistic analysis. He estimates that the JCI will be closed in the range of 4,900-5,150 this year. Without tax amnesty, Reza predicts that JCI will naturally stand at the range. Some analysts said that today’s support of JCI has been at below of the psychological level of 5,000.

(Muhammad Farid/Translator)