Jakarta, CNBC Indonesia – Domestic financial markets were mixed last week, with the main issue being the announcement of the monetary policy of the United States (US) central bank, also known as the Federal Reserve (The Fed). In addition, there is also the case of the Chinese property giant, the Evergrande Group.
At the beginning of this week, Monday (27/9/2021), the financial market will still not be compact, because there are several issues that affect one of them, namely several elite Fed officials who will talk about economic conditions and monetary policy.
The statements of the Fed’s elite, especially if there are details of tapering, could have a significant impact on financial markets until tomorrow. Other factors that affect the market today will be discussed on pages 3 and 4.
Over the past week, the Composite Stock Price Index (JCI) managed to gain 0.19% to 6,114.815, whereas previously it had fallen below the psychological level of 6,000. With this positive performance, JCI posted a 2-week gain in a row.
Market data noted that foreign investors made a net purchase of Rp 2.75 trillion in the regular market.
The rupiah recorded the opposite performance, weakening for the second week in a row. Over the past week, Garuda’s currency weakened 0.21% against the US dollar to Rp 14,255/US$.
Indonesian bonds also suffered the same fate. The price of State Securities (SBN) has almost all weakened. Only the 3 -year tenor SBN strengthened, seen from the results which dropped 2.7 basis points to 4.587%.
Movement yield as opposed to the inverse of the bond price, when the price goes up the yield will go down, and vice versa.
The case of Evergrande Group, which is at risk of default, made market players’ sentiment worsen at the beginning of the week, which made it difficult for the Indonesian financial market to strengthen. However, the fear of default eased after China’s central bank (People’s Bank of China / PBoC) injected a large amount of liquidity into the market.
Meanwhile, the Fed is the most awaited by market participants. In the early hours of Thursday Indonesia time, the Fed announced monetary policy, the results of which were still in line with market participants’ expectations for tapering, but there are surprises regarding the interest rate projections.
The central bank, led by Jerome Powell, said it would immediately tapering, but there is no official time yet. While the market expects the Fed to announce it in November and the first tapering to take place in December.
Meanwhile, for interest rate projections, it can be seen from dot plot. Every point in dot plot This is the view of each member of the Fed on interest rates.
In dot plot most recently, as many as 9 people from 18 members of the Federal Open Market Committee (FOMC) now see interest rates could rise next year. This number increased by 7 people compared to the June edition of the dot plot. At that time, the majority of the FOMC saw interest rates rising in 2023.
This means that there is a significant change in interest rate projections. Interest rate hikes that are faster than before are more risky to trigger capital outflow from Indonesia, and other countries emerging market others, causing turmoil in global financial markets. Moreover, if the Fed will be aggressive in raising interest rates.
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