Indonesia's Stock Index Falls amid Mixed Markets and Rupiah Concerns
Indonesia's main stock index (IHSG) was not able to continue yesterday's rise as investors, particularly domestic investors, engaged in profit taking. Foreign investors, who were net buyers of Indonesian assets, were not able to guide the IHSG to positive territory. Mixed Asian stock indices, responding to weak Chinese data, did not support Indonesia's index. Moreover, market participants expect that the rupiah will continue its weakening trend and have begun speculating whether the benchmark interest rate (BI rate) will be raised again.
The weak rupiah and higher interest rates will interfere with the performance of companies that have exposure costs in US dollars. Similarly, rising interest rates for credit cards added to negative market sentiments. Indonesia's main index fell 1.03 percent to 4,718.10 on Wednesday (24/07).
The Indonesian rupiah continued its fall against the US dollar in line with other currencies that followed the weakening trend. The Australian dollar fell due to lower than expected inflation. China's yuan weakened after the HSBC manufacturing PMI contracted and indicates slowing growth of China's economy. Indonesia's central bank has not announced any plans yet that aim to support the rupiah and this makes investors believe that the bank will let the rupiah weaken further.
| Source: Bank Indonesia♦
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