Jakarta, CNBC Indonesia – In the midst of the Composite Stock Price Index (JCI) managed to start December positively, foreign investors were noted to be keen to make net sales (net sell) over the past week.
According to data from the Indonesia Stock Exchange (IDX), the JCI managed to rise 0.91% to a position of 6,643.932 over the past week, after appreciating for 4 consecutive days. However, foreigners made a net sale of Rp 769.56 billion in the regular market. Yesterday alone, foreign investors flocked out of the domestic market with a net sell record of Rp 106.41 billion in the regular market.
The selling action by foreigners occurred in the middle of the discourse the central bank of the United States (US) or known as the Federal Reserve (The Fed) will accelerate the rate of tapering or a reduction in the value of the asset purchase program (quantitative easing/QE) as US inflation continues to soar.
“Right now the economy is very strong and inflation is also very high, so in my view it would be appropriate to consider finishing the tapering sooner, maybe a few months early,” Fed Chair Jerome Powell said before the US Senate, as proclaimed. CNBC International, Tuesday (30/11).
Powell also said he would discuss acceleration tapering in this month.
“I expect the Fed to discuss accelerating tapering at the December meeting,” Powell added.
The Fed’s current QE value is $120 billion, and tapering started last November. That is, until QE becomes zero it will take 8 months.
The Fed is now expected to increase tapering up to US$ 30 billion per month, so QE will be zero within 4 to 5 months. In addition, the Fed is also predicted to give aggressive indications of raising interest rates next year.
For now, the Fed is expected to raise interest rates two to three times next year.
Previously, loose monetary policy by supplying more money to the market was carried out by the Fed to help the US economy which was contracted due to the Covid-19 pandemic that had been going on since early last year.
Will it be Tapering without The Tantrum?
This then begs the question: did the Fed’s aggressive steps make foreigners rush to leave the Indonesian capital market or was it a natural thing to sell foreigners?
Looking at the events of 2013, when the Fed did tapering, then capital flows will leave the country emerging market (developing markets) and return to Uncle Sam’s Land. This risks triggering turmoil in global financial markets.
In 2013, the Fed, which was then led by Ben Bernanke, began to announce tapering in the middle of the year, and was only executed in December. The Fed’s QE finally officially ended in October 2014.
After that, speculation emerged that the Fed’s interest rates would increase in financial markets until 2015.
According to records CNBC Indonesia, since Bernanke announced tapering in June 2013 the rupiah exchange rate has continued to decline until it peaked in September 2015.
At the end of May 2013, the rupiah exchange rate was at the level of Rp. 9,790/US$, while on September 29, 2015 it touched the weakest level of Rp. 14,730/US$, meaning that there was a decline of more than 50%. JCI at the beginning taper tantrum also experienced a sell-off. In the May-September 2013 period, the JCI fell by 23%.
Then, how about the tapering this time? Will it be accompanied by a tantrum in emerging markets? Or is it just tapering without significant fluctuations in the financial market, aka tapering without the tantrum?
A number of analysts and capital market circles assess tapering to The Fed this time will not be as scary as in 2013.
Director of PT Syailendra Capital Fajar R. Hidajat, for example, told CNBC Indonesia last November, the effect of tapering in 2021 will not be like tapering in 2013 to 2015.
He said, tapering in 2021 will give upsite. Meanwhile, the market will experience a little volatility, especially in Semester I-2022.
“But it could be possible tapering effect will not have a very significant effect. Bottom line volatility, all securities will be affected, but the effect may not be like the first tapering,” Fajar said at the 2021 CNBC Indonesia Award ‘The Best Securities and Asset Management Companies’, Tuesday (11/23/2021).
Similarly, Head of Investment Information at PT Mirae Asset Sekuritas Indonesia, Roger revealed, the impact of tapering the stock market in Indonesia is considered not to be too significant.
This is because investors tend to pay more attention to financial reports in the third quarter and data on the domestic economy which is starting to show a recovery, such as the Indonesian PMI index which was at the highest level of 57.2.
“Impact tapering not too significant for the Indonesian market. If there is a capital outflow, it will not have a significant impact on the JCI,” said Roger, Thursday (11/4/2021).
Moreover, according to the records CNBC Indonesia Research TeamEven though the Fed is expected to be aggressive in increasing its normalization of monetary policy, in fact it does not necessarily make the US dollar run rampant. The rupiah is still quite strong if you look at its movement which was able to strengthen for 3 consecutive days this week.
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