BI is lowering interest rates, consider the following recommendations for banking stocks

ILLUSTRATION. Interest rate cuts provide a positive sentiment for the business world and can raise credit demand.

Reporter: Ika Puspitasari | Editor: Wahyu T. Rahmawati

KONTAN.CO.ID – JAKARTA. Bank Indonesia (BI) again lowered its benchmark interest rate by 25 basis points (bps) to 3.75% at the BI Board of Governors Meeting (RDG) November 2020. Previously, the BI-7 Days Reverse Repo Rate (BI7DRR) was cut by 25 bps, from 4.25% to 4% in July 2020.

Kiwoom Sekuritas Indonesia analyst Sukarno Alatas said the cut in the benchmark interest rate provided positive sentiment for the business world and could raise demand for credit. “The lending should be able to grow again with lowering interest rates,” said Sukarno, Sunday (22/11).

Sukarno added that the majority of banks could enjoy BI’s decision to lower the benchmark interest rate. However, commercial bank business activities (BUKU) IV have the most dominant potential to reap the benefits.

“The reason is that there could be a quick response to deposit and savings interest rates. Meanwhile, the credit interest rate will be responded after a few months or about three months. Here banks will enjoy higher margins for several months, “he added.

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On the other hand, he explained that low interest rates are also a challenge in terms of obtaining cheap funds. Sukarno said that difficulties in obtaining cheap funds could occur because of the potential for people to attract funds and prefer to place their funds in investment instruments with higher yields than deposits.

However, Sukarno sees banking sector stocks as having a positive outlook in line with the potential for growing demand for credit due to lower interest rates.

Therefore, Sukarno suggested that market players could start buying accumulation for banking shares, especially BUKU IV banks and state-owned bank shares such as BBNI, BBRI, BBTN, BMRI, and BBCA.

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According to him, these stocks have the potential to increase the price of at least 10-15 percent from the last price. “Apart from that, momentum window dressing so additional sentiment. These stocks become foreign and para options big fund for their portfolio, “said Sukarno.

At the close of trading on Friday (20/11), BBNI’s shares had corrected 1.30% to the price of IDR 5,675 per share, BBRI was also minus 0.50% to IDR 4,020 per share, BBTN shares fell 1.47% to IDR 1,680 per share. shares, BMRI fell 0.40% to Rp 6,300 per share, and BBCA fell 0.23% to a price of Rp 33,000.

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