Taper Tantrum (Temporarily) Disappears, JCI Will Soar?

Jakarta, CNBC Indonesia – The Composite Stock Price Index (JCI) was able to record a slight gain this week. Rupiah and bonds also recorded strengthening. Issue development tapering became the main driver of the domestic financial market in a week.

According to Refintiv data, the JCI was able to record a 0.18% gain to 6,041,366, ending the slump in the previous 2 weeks. Within a week, foreign investors recorded a net buy (net buy) of Rp 111 billion.

From the bond market, only 1 year tenor Government Securities (SBN) experienced a weakening, other than that it strengthened. This strengthening was reflected in a decrease in yield.

Bond prices are inversely proportional to yield. When the price goes up then yield will decrease, and vice versa. When the price rises, it means that there is a buying action, and it is possible for foreign investors to take it, which means it happens capital inflow.

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The inflow of capital into the country made the rupiah strong, strengthening 0.24% against the United States (US) dollar to Rp. 14,415/US$.

Tapering or a reduction in the value of the asset purchase program (quantitative easing/QE) by the US central bank (The Fed) this year is not just an issue. The Fed itself indicated this from the release of the minutes of the July edition of the monetary policy meeting.

In the minutes, the majority of members of the Fed’s Federal Open Market Committee (FOMC) saw the possibility of: tapering done this year. In addition, elite Fed officials who are also members of the FOMC have clearly stated their desire to do this tapering this year.

“We probably don’t need to do any more asset purchases at this point,” said the Fed’s St. Louis, James Bullard told CNBC International, yesterday.

Bullard reiterates his choice to immediately do tapering QE, which is currently valued at US$ 120 billion per month, and ends the program early next year.

There’s another Kansas City Fed president, Ester George, told Fox Business that she expects detailed information about the tapering will be after the Fed’s September monetary policy meeting.

“With inflation strong and the labor market recovery expected to continue, there is an opportunity to reduce asset purchases,” said George.

It’s also easier if tapering done more quickly than backwards again.

While the president of the Dallas area Fed, Robert Kaplan said the Fed should announce the tapering in September, and do so in October or not far from the announcement, and be completed within 8 months.

These comments indicate tapering will do this year, but market participants are also waiting for a statement from the Fed chair, Jerome Powell, at the Jackson Hole symposium last Friday night.

Reinforcing the issue tapering made Bank Indonesia conduct a stress test by preparing a number of policies, in order to mitigate potential pressures on the country’s financial markets. This was stated by the Senior Deputy Governor of BI, Destry Damayanti.

“In the future there is a risk of a policy plan to reduce the stimulus or tapering by the Fed. We agreed to do an anticipation simulation stress test tapering,” he said in a meeting with Banggar DPR, Wednesday (25/8/2021).

In addition to risk tapering the, stress test What BI will do is also to anticipate the increase in the Delta Covid-19 variant which could trigger a decline in investor confidence.

NEXT PAGE >>> Powell Eliminates Taper Tantrum (temporarily), JCI Ready to Soar

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