Jakarta, CNBC Indonesia – The move by the United States central bank, the Federal Reserve to raise interest rates faster this year, is feared to have an overreaction from domestic investors. Understandably, domestic investors usually make the stock market of Uncle Sam’s country as a mecca to invest.
Director of PT Eastspring Investments Indonesia Ari Pitojo said that the fundamentals of the domestic stock market are considered to be in better condition now than in 2013. In addition, the current strength of domestic investors also dominates the domestic financial market compared to foreign investors.
“The only thing that is feared is an overreaction. So when the American stock market falls, Asia will fall, we will also fall, that’s what we are afraid of. The reaction is not because of fundamentals, because if Indonesia’s fundamentals are very strong, far from 2013,” said Ari in an interview with CNBC Indonesia TV. , Friday (7/1/2022).
He explained that currently foreign ownership in domestic investment assets is relatively small, so there is no concern about an outflow of funds.capital outflow) too much.
This is because, in the last two years, foreign ownership in domestic bond assets has continued to decrease, and currently the amount is very small.
Similarly with stock assets, foreigners have just entered (capital inflow) to Rp 38 trillion last year. This figure is considered not a large number compared to the ability of domestic investors.
“So if from flow no worry, which worry it’s an overreaction to the Fed’s plans especially from the outside. From the inside usually like to follow those from the outside. If there is any concern usually more there,” he said.
As previously reported, the release of the Fed’s minutes indicating the normalization of monetary policy may be carried out more quickly. Not only aggressively raising interest rates, some members of the Fed also looked at the value of the balance sheet (balance sheet) can also be reduced.
“Monetary policy meeting participants generally noted that, looking at the outlook individual impact on the economy, labor market and inflation, it may be necessary to increase interest rates earlier or at a faster rate than previously thought. Several participants also noted that it would be appropriate to start reducing the value of the balance sheet immediately after the interest rate hike,” the Fed notes quoted as saying Reuters, Thursday (6/1/2022).
With the possibility of the Fed reducing its balance sheet, by selling its bonds, liquidity in the economy will be reabsorbed, and is expected to be able to reduce high inflation.
But as a side effect, liquidity is absorbed more quickly and risks becoming tight, which is unfavorable for the stock market.
(my / vap)
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