Indonesia Stock Exchange Influenced by US Economic Data and Fed Stance
Stock indices in the United States were up for the third day in a row on Thursday (27/06). Main reason for this upward trend are various positive macroeconomic figures from the USA. The number of homes under contract to be sold (excluding new construction) grew 6.7 percent in May, while analysts had forecast growth of about 1 percent from the previous month. Personal spending, which accounts for about 70 percent of the domestic economy, grew 0.3 percent in May, while personal income rose 0.5 percent.
On Thursday (27/06), the Dow Jones index ended 0.77 percent higher at 15,024.49, the S&P 500 gained 0.62 percent to 1613.20, and the NASDAQ grew 0.76 percent to the level of 3401.86 points.
Recently, peculiar volatility has been seen in global markets. On one day, positive data about a recovering US economy provides a boost to American as well as global stock indices, while on the next day similar positive data about the US economy causes global concerns as a recovering US economy may convince the Federal Reserve to stop its quantitative easing program.
Yesterday (27/06), head of the Federal Reserve bank of Atlanta, Dennis Lockhart, said that investors may have misunderstood Ben Bernanke last week when the latter announced a toning down of the stimulus program. Volatility in financial markets are due to varying interpretations of Bernanke's words. What Bernanke meant, according to Lockhart, is that the stimulus program should be used in a flexible manner. However, investors misunderstood and thought Bernanke's words implied a complete stop to the program. Lockhart expects that the monetary policy will continue for quite some time to come in order to support domestic economic growth.
European Stock Markets
European markets were mixed on Thursday (27/06) morning as some gloomy reports indicated that economic recovery of Europe is still far away. French consumer confidence in June declined to the lowest level ever, while industrial sentiment in Italy also weakened sharply. Italy is expected to experience a larger recession than initially forecast. Moreover, economic growth in Ireland declined unexpectedly by 0.6 percent in Q1-2013. However, after macroeconomic data of the USA were released, most European markets quickly went up.
Indonesia Benchmark Stock Index
The aforementioned economic growth figures will carry over into Asian markets today as these markets were already closed before macroeconomic numbers of the USA were released on Thursday (27/06). Indonesia's main stock index (IHSG) ended at 4,675.75 points, a 1.92 percent increase on Thursday. However, this growth was in fact due to weak economic data, released on Wednesday, that indicated lower than expected US economic growth in Q1-2013. Investors were glad about this weaker US performance as it may lead to a continuation of the Federal Reserve's bond-buying program.
Remarkably, foreign investors were net buyers (USD $5.1 million worth of shares) on Thursday's trading day at the Indonesia stock exchange (IDX), while during the previous 25 trading days, foreign investors had been selling more stocks than they bought. Indonesia's big cap stocks, always the favorite of foreign investors, rose strongly. Gas distributor Perusahaan Gas Negara (PGAS) grew 5.71 percent, telecommunications provider company Telekomunikasi Indonesia gained 5.37 percent, while consumer goods producer Unilever Indonesia rose 5 percent.