Higher March Headline Inflation No Problem for the Indonesia Stock Exchange
Usually, news about inflation is not well-received by market participants. Particularly when inflation turns out to be higher than expected. This time, however, something interesting happened in Indonesia. Although the country's March inflation rate was high (5.90 percent year-on-year), it was not followed up by a negative response of market players. In fact, the inflation rate seems to have strengthened the Indonesia Stock Exchange (IHSG), which gained 0.40 percent on Tuesday.
The main pillar of Indonesia's IHSG rise to the level of 4957,25 on Tuesday was the consumer goods sector, which gained 1.42 percent. The decline of the Dow Jones Index on Monday also did not have a negative effect on the IHSG. Rising Asian indices (Hong Kong's Hang Seng index, Australia's ASX index, and Taiwan's TWSE index) were followed by the positive openings of European markets on Tuesday and it all reinforced the upward movement of the IHSG, despite intraday trading being flat. Trade volume and total value of transactions increased, with foreign investors mostly buying Indonesian assets, while domestic investors mostly sold theirs.
The IDR rupiah fell slightly. The US dollar itself also weakened as the Federal Reserve maintains its bond- buying program although market players assess the US labor market is already recovering gradually. The rupiah weakened as investors were not happy to see Indonesia's trade deficit of about US $330 million. On Monday, Statistics Indonesia stated that February's exports fell 2.51 percent (month-on-month) and fell 4.50 percent (year-on-year). In combination with increased inflation in March, it hurt the rupiah. It is hoped that the Euro-zone's increased Manufacturing PMI as well as increased US Factory Orders will support the IHSG this Wednesday.
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