10 May 2022 (closed)
Jakarta Composite Index (6,819.79) -89.96 -1.30%
USD/IDR (14,146) -6.00 -0.04%
EUR/IDR (17,335) +57.05 +0.33%
Contrary to the expectation of most analysts, the Federal Reserve decided to continue its monthly USD $85 billion bond-buying program, known as quantitative easing, and retained the low interest rate of 0.25 percent. Although coming as a surprise, the news was well-received by the investor community all around the world, who were eager and confident to purchase stocks. The benchmark stock index of Indonesia, IHSG, felt this impact too and rose 4.65 percent to 4,670.73 points.
What were the factors that impacted positively on the IHSG on Thursday's trading day (19/09)? The IHSG was influenced by rising Asian markets, by foreign investors who were net buyers of Indonesian stocks, by the sharply depreciating US dollar against the rupiah and, lastly, by positive openings of European stock indices. It thus became a good day at the office at the Indonesia Stock Exchange (IDX). However, domestic investors were net sellers of Indonesian assets.
The outcome of the FOMC meeting also impacted on the performance of Indonesia's currency, the rupiah. The continuation of the quantitative easing program in combination with the low US interest rate resulted in the perception that the supply of US dollars on the capital markets will continue to grow. This subsequently weakens the US currency. It also made other Asian currencies rise against the US dollar as demand for this safe haven-currency diminished.| Source: Bank Indonesia
Asian stock indices were up after the Fed's announcement to continue the massive bond-buying program. As the US dollar depreciates, market participants expect Asian economies to grow higher than projected and thus reduces expectations of monetary tightening in Asia. Other contributors to positive market sentiments in Asia were various data from Japan. The country's export-import balance, all industries activity index as well as leading economic index were good. Lastly, global commodity prices were up and provided positive market sentiments.