JAKARTA. Since yesterday, global market is paying attention to The Federal Open Market Committee (FOMC) meeting. Yesterday, regional markets, including Indonesia Stock Exchange (IDX) were closed lower, while Jakarta Composite Index (JCI) dropped by 0.36% to 5,302.49. However, the majority of domestic and global market players predicted that the result of FOMC meeting will not be in favor of increasing The Fed’s rate in immediate time. Result of a survey indicates that the probability of increase in The Fed’s rate is only 20%, while 80% of probability stands at maintaining The Fed’s rate.
The increase in The Fed’s rate will affect global market, including IDX. “If The Fed’s interest rate raises, the short term index will be dropped to 5,200”, said analyst at Semesta Indovest Aditya Permana. The projection was made by assuming the range of Fed Funds Rate or FFR rise. Under a concensus, 88% of samples predicted that FFR will rise around 0.25% to 0.50%. In this case, JCI will receive red alert if the FFR increases by more than 0.50%. Head of Research Department at MNC Securities Edwin Sebayang predicted that JCI may be corrected to 5,106, or even drop to 4,805 if The Fed decides to increase its rate, on the grounds that Indonesian market liquidity still depends on hot money from abroad. The Fed’s rate rise also has potential to push down Rupiah into the level of IDR13,500 per US dollar. However, Rupiah’s exchange rate will return to IDR13,000 per US dollar ahead of the end of the year. Conversely, market has potential to rebound if FFR does not go up. Under this condition, JCI is predicted to exceed the level of 5,300. “JCI tends to increase”, said anakyst at Recapital Securities Liga Maradona.
The issues related to FFR become market’s concern due to the increase in inflation in the United States of America (the US) during August 2016 that went beyond expectation. During the same period, living expenses in the US also increased beyond prediction. The increase in living expenses contradict with the index of consumer’s confidence in the US in September 2016 that dropped to the lowest level since April 2016. Meanwhile, the US’ economic also dropped to low level within one year period. “These have driven uncertainties in market”, said analyst at Valbury Asia Securities Nico Omer in his research. However, analysts are optimistic that JCI in the long term still has potential to increase. Head of Research Department at MNC Securities Edwin Sebayang is optimistic that in 2017 JCI may touch the level of 6,563 by assuming that earning per share (EPS) stands at IDR345.40. In moderate and more pessimistic manners, Edwin projected that JCI may stand at 5,782 and 5,181, respectively. (Muhammad Farid/Translate)
