World is Waiting for Outcome of the FOMC Meeting; IHSG falls 0.10%
After a strong performance yesterday, the Jakarta Composite Index (IHSG) fell 0.10 percent to 4,517.62 points on Tuesday (17/09). Part of the investor community grabbed their chance to engage in profit taking after yesterday's gain but most investors are careful and reluctant to make any major decision prior to the result of the Federal Reserve's FOMC meeting (17-18 September). It is expected that after this meeting there will be more clarity about the future of the Fed's quantitative easing program.
Similarly, investors in Europe were hesitant to trade. When European stock indices opened slightly down on Tuesday (17/09), they pulled Asian indices down too, including the IHSG. And, as usual, when most sectoral indices of the IHSG fall, it are the commodities that perform well. Foreign investors continued to buy more Indonesian shares than they sold. On the contrary, domestic investors were net sellers of Indonesian assets.
Although the US dollar is weakening against the Euro after Germany's Investor Confidence rose, the Indonesian rupiah is still depreciating. The higher yield on Indonesia's government bonds (SUN) had a negative impact on the value of the rupiah. Apparently, ahead of the FOMC outcome, currencies in emerging markets tend to weaken while the US dollar appreciates. Almost all emerging markets' currencies depreciated against the US dollar.
| Source: Bank IndonesiaAlthough yesterday Asian indices strengthened after news spread that Lawrence Summers, who is regarded as quite radical in lowering the Fed's stimulus program, will not be eligible for the chairmanship of the Federal Reserve, today, Asian markets suffered from the wait & see attitude of investors ahead of the FOMC meeting (even though most investors seem certain that there will be no sudden drastic ending to the bond-buying program). Negative market sentiments also came from China where both Foreign Direct Investment and the CB leading Economic Index contracted.
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