Jakarta, CNBC Indonesia – The financial market in the country is getting sluggish. Foreign funds have continued to flow out (outflow) since mid-February. In the bond market only, outflow which happened in the last 2 weeks reached Rp. 20 trillion.
Wellian Wiranto, an economist at OCBC Bank Singapore, explained that the main problem in the financial market currently comes from the United States (US). The US economy is projected to recover more quickly, leading to higher yields or yield of the US Treasury, US bonds.
U.S. inflation is also expected to continue to rise with many speculating that the U.S. Federal Reserve (Fed) will raise benchmark interest rates in a meeting that took place on Wednesday.
“That’s why challenging the period with the increase in US Treasury yields, “said Wellian in the CNBC TV program, Wednesday (17/3/2021).
Wellian sees that market players are looking for new positions, so that in the near future yield US Treasury is still possible to continue to rise.
For information, bond prices and yield bonds are opposite, so when prices go up then yield bonds go down. Conversely, when bond prices fall, the yield increases.
“Because the U.S. economy is recovering pretty fast, coupled with the vaccination of Joe Biden’s program [Presiden AS] which is quite fast and there is a stimulus of US $ 1.9 trillion [setara Rp 27.000 triliun, kurs Rp 14.000/US$] that is large, so inevitably some of these elements will continue to encourage the US economy to recover rapidly, “he explained.
The current Wellian fear is the market’s overreaction to the Fed’s decision and it happened suddenly. Fund holders will definitely be confused to guess the direction of the next movement.
“What I fear is that in short periods, the market could be over reacting, it could push the interest rate hike to break that level of a certain percentage. It is the volatility created in that situation that we are worried about,” he explained.
The government and other regulators such as Bank Indonesia and the Financial Services Authority (OJK) must also prepare for all the possibilities that occur. Luckily, the foreign exchange reserves are quite large, so they can dampen exchange rate fluctuations.
“I think BI is already thick enough, they are all collecting cadev [cadangan devisa] and February above US $ 138 billion [setara Rp 1.932 triliun], can be used in period high volatility like that, “said Wellian.
From the stock market, the Composite Stock Price Index (JCI) was thrown into negative territory in the first trading session on Wednesday (17/3/2021), amidst the continued increase in yields on US bonds.
IDX data noted, JCI opened up 0.13% to 6,318.06 but ended at 6,2827.688 at the close of the first session, or weakened by 0.35% (22 points). JCI only stayed in the green for about 20 minutes after opening and then sank into the red zone.
Although today foreigners entered IDR 47 billion in the stock market, but in the last month foreigners recorded a net sell of IDR 507 billion.
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