Indonesia is on the verge of recession, this is the impact on the JCI

ILLUSTRATION. JCI correction still has the potential to occur until next month.

Reporter: Akhmad Suryahadi | Editor: Wahyu T. Rahmawati

KONTAN.CO.ID – JAKARTA. Just waiting for the official announcement, Indonesia will enter the brink of recession. Minister of Finance Sri Mulyani also predicted that domestic economic growth in the third quarter of 2020 would be in the range of -2.8% to -1%.

President Director of CSA Institute, Aria Santoso, said that the news of Indonesia’s entry into a recession was not a new surprise. A number of countries are also entering into a recession phase. However, selling pressure on the stock market is expected to last until the end of September.

Aria projects that this selling pressure will last until the market sees the release of data in October, namely the final report on the company’s financial performance in the third quarter. After that, it will happen rebalancing portfolios carried out by market players.

“With the current conditions, a recession will be a short-term sentiment but a long-term opportunity when there is a recovery,” Aria told Kontan.co.id, Wednesday (23/9).

Also Read: The next 3 days in a row, JCI is projected to rebound on Thursday (24/9)

Likewise, Panin Sekuritas Head of Research Nico Laurens said the market had anticipated a recession. What is of concern now is the downward revision of the economic growth target. This factor is not appreciated by market players.

Finance Minister Sri Mulyani Indrawati said national economic growth until the end of the year will be in the range of -1.7% to -0.6%. Previously, the State Treasury had projected that domestic economic growth would still be in the range of -1.1% to 0.2%.

Nico gave an example, when European countries and the United States (US) announced a downward revision of economic growth, the stock market responded negatively. However, when the data gross domestic product (GDP) is released and the result is a contraction as well as a recession, the stock market can still go up.

Today, the Composite Stock Price Index (JCI) closed at 4,917.95 levels after losing 0.33%. JCI has been beaten for three days in a row since Monday (21/9).

Also Read: JCI predicted a technical rebound on Thursday (24/9)

Sebastian Tobing, Head of Research at Trimegah Sekuritas, said that the JCI currently has reached its fair value (fair value). In fact, the signs of a recession are clear. “From a month ago it is clear that GDP growth in the third quarter is definitely negative year-on-year, “Sebastian explained to Kontan.co.id, Wednesday (23/9).

Moreover, the government has re-implemented the second volume of large-scale social restrictions (PSBB) which further emphasizes that the third quarter GDP will still be negative. Sebastian assessed that the potential for the JCI to fall back down was still wide open.

If the positive daily case of corona rises to 5,000, it will increase the risk of a deeper decline for the JCI. Trimegah Sekuritas is still reviewing the JCI target until the end of 2020 in line with the development of the Covid-19 vaccine.

Nico projects that the JCI will be at the level of 5,364 until the end of 2020. Meanwhile, with the pessimistic scenario, Aria projects the JCI can only reach the 5,000 level and with an optimistic scenario it can touch the 5,200 level by the end of 2020.

Also Read: JCI fell for the third day to 4,917.97 on Wednesday (23/9), foreign selling was still big