US Debt Ceiling Agreement Results in Rising Jakarta Composite Index
The Jakarta Composite Index (IHSG) rebounded on Thursday's trading day (17/10), supported by good news from the United States where finally an agreement was reached regarding the US debt ceiling. This agreement brought positive market sentiments on Asian stock markets, including the IHSG which rose 0.59% to 4,518.93 points. Moreover, Indonesia's minister of Economy Hatta Rajasa stated that Indonesia had not been significantly impacted by the US shutdown issue and this statement also managed to ease investors' concerns.
On the other hand, the rising IHSG was not followed by an appreciating rupiah exchange rate, while European stocks opened weak on Thursday (17/10) and thus slightly curtailed the IHSG's upward movement.
In line with easing concerns about the shutdown of the US economy after Democrats and Republicans came to an agreement, the US dollar became attractive again. As such, the rupiah exchange rate was pressured. However, the US dollar's appreciation was limited as speculation lingers on that the Federal Reserve will continue its quantitative easing program without slowing down the pace of bond-purchases (at USD $85 billion per month) in order to support economic growth.
News that an agreement was about to be reached in US Congress made the global oil price fall and impacted positive on non-commodity stocks. As a result most Asian indices were up. China's benchmark index was the exception, however, as its index was plagued by internal issues. Chinese companies that are involved in the Shanghai Free Trade Zone are considered to have stocks with high valuations which makes them unattractive. Moreover, China's economic growth in the third quarter of 2013 is expected to be relatively low.
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