JCI has the potential to weaken in the next week, pay attention to the following 8 sentiments

Reporter: Wahyu Tri Rahmawati | Editor: Wahyu T. Rahmawati

KONTAN.CO.ID – JAKARTA. Composite Stock Price Index (IHSG) closed down 24.81 points or 0.46% to 5,346.66 at the end of trading Friday (28/8). Even though it fell in the last trading day of this week, the JCI was still recorded up 1.40% in a week.

Before going down on Friday, the JCI had risen for four consecutive trading days. As a result, Friday’s correction did not work to put pressure on the JCI in a week.

Director of Anugerah Mega Investama Hans Kwee estimates that the JCI in the next week will have the opportunity for consolidation to tend to weaken after the strengthening that has occurred in the last few weeks. “JCI will move with support at the level of 5,324 to 5,218 and resistance at the level of 5,400 to 5,450, “said Hans in his research, Saturday (29/8).

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Hans said, there are eight main sentiments that might influence JCI movement in the next week. The sentiments are:

1. The change in the policy approach of the Federal Reserve (The Fed) that was presented by Jerome Powell has long-term implications for financial markets.

Previously, the central bank of the United States (US) tried to boost the economy and when inflation reached 2%, the Fed began to raise interest rates. The Fed will now adopt an average inflation target that will keep interest rates low when inflation rises in the future. Inflation will be average so it will take longer before the Fed raises interest rates.

2. In addition to low interest rates, the Fed is expected to continue providing stimulus to encourage the economy to reach the 2% inflation target.

Since the 2008 crisis it has been very difficult for the economy to rise above 2% in the long run. So this encourages the long estimate of the low interest rate regime. The stock and bond markets are likely to be positive in the long term due to low interest expectations and continued stimulus even as the economy has recovered from the Covid-19 pandemic.

When a vaccine is found and the pandemic is contained the market will still see low stimulus and interest rates as a result of waiting for inflation rates to rise. These cheap funds will go into emerging markets including to Indonesia.

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3. Changes in the Fed’s approach will also affect the US dollar exchange rate.

It is estimated that the US dollar will have a long-term downward trend due to high dollar liquidity and low interest rates. In general, the rupiah should be able to strengthen in the long term against the US dollar.

In general, low interest rates will encourage a country’s exchange rate to weaken. There is indeed an effect from the balance of payments or capital inflow and outflow, inflation and economic conditions. The Fed will be late in anticipating changes in inflation and changing its interest policy so as to encourage the exchange rate to weaken.

4. The withdrawal of Japanese Prime Minister Shinzo Abe due to health reasons made the yen strengthened significantly against the US dollar.

Abe’s successor will probably change Abenomics’ ongoing economic policies and stimulus. Yen as currency safe haven experiencing strengthening. This may not have had a significant impact on the Indonesian economy. However, this could support the strengthening of the Rupiah exchange rate due to the weakening of the US dollar in the market.

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