Completely
opposite to our expectations, the benchmark stock index of Indonesia (known as
the Jakarta Composite Index or IHSG) managed to climb 0.57 percent to 4,862.02
points on Wednesday (07/05). The gain was unexpected as there were no clear
factors that could provide positive market sentiments. Moreover, today's Asian
stock indices were mostly down. Coincidence or not, tomorrow Bank Indonesia
will announce whether its benchmark interest rate (BI rate) - currently set at
7.50 percent - will be changed or maintained.
I expect
that the BI rate will be maintained at 7.50 percent as several economic data
(inflation and the trade balance) are showing an improving trend. Moreover, in
June and July there may be inflationary pressures due to the holy fasting month
(Ramadan) and subsequent Idul Fitri celebrations - which both give rise to
increased household consumption - as well as higher electricity prices.
Higher
commodity prices were probably the reason behind Indonesia's rising plantation
and mining stocks. Asian indices were mostly down due to the appreciating
Japanese yen (against the US dollar). This caused the Nikkei index to fall,
dragging other Asian indices down with it.
The
Indonesian rupiah exchange rate depreciated 0.51 percent to 11,578 per US
dollar based on the Bloomberg Dollar Index. As usual, ahead of the central
bank's Board of Governor's Meeting, the currency tends to depreciate,
particularly when market participants expect that the BI rate will be
maintained as that will not bring new stimulans for the rupiah. Bank
Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate,
abbreviated JISDOR) depreciated 0.13 percent to IDR 11,527 against the US
dollar on Wednesday (07/05).
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