IDX Composite Weakens, BI Governor: Capital Outflow Quite High

TEMPO.CO, Jakarta - The wave of recession hitting a number of countries had resulted in negative sentiment in the national financial market. The Indonesian Composite Index (IDX) experienced a 3.85 percent decrease in five consecutive days this week.

Bank Indonesia Governor Perry Warjiyo said that since Friday last week, the amount of foreign funds channeled out of the stock market was considerably high. "Capital outflow in the stock market reaches IDR 840 billion," Perry said on Saturday, October 4, 2019.

Based on Tempo's records, during the riot in Jakarta at the end of September, the amount of foreign funds leaving the country reaches IDR 565.19 billion and IDR 993.94 billion in just two days.

Perry asserted that the stock market bsnm,cm. In an effort to dampen the effects of global recession, Bank Indonesia suggested the government to improve economic growth factor, specifically household consumption and investments. "Social aid from the government is effective to support consumption," Perry said.

Another source of growth Perry said, are infrastructure projects that continues to proceed. "We also hoped that in the third and fourth quarter, fiscal expansion or government spending will be higher to support growth," Perry explained. Bank Indonesia projected that economic growth for 2019 will reach 5.1 percent and close to 5.3 percent in 2020.

On Friday, October 5, 2019 however, the IDX managed to gain 22 basis point (0.38 percent) to a level of 6,061. During the weekend trade, foreign investor recorded a net buy of IDR 420.5 billion.

On a separate note, Bank Indonesia recorded the amount of capital inflow into the financial market starting from the beginning of 2019 until October 3 had reached IDR 192.6 trillion. As many asIDR 137.9 trillion of the funds enters Indonesia through State Bonds, while another IDR 52.4 trillion through shares. "The remaining [funds] enter through corporate obligations and other [financial] instruments," Perry stated.

Finance Minister Sri Mulyani Indrawati said that the government will continue to focus on expansive fiscal instruments. "In addition to encouraging budget spending, the government is focusing on improving the investment climate," Minister Sri said.

Director of Investa Saran Mandiri Hans Kwee, said that the government must be on the lookout for the effects of recession against the financial market. "Demands for commodities will decline, therefore Indonesian companies working in this sector will feel pressure," Hans said.

Hans also mentioned that global recession has caused investors to diver their assets to safe havens such as the United States Dollars. "As an effect, the Rupiah exchange rate and the stock market will weaken," Hans predicted.

Hans also forecasted that the IDX support level will be at 5,957 to 6,030 while its resistance level will be at 6,100 to 6,200.

Researcher from Center for Indonesia Policy Studies Pingkan Audrine, said that the government continues to remain cautious against factors that can potentially increase the chances of the country to enter the global recession vortex. The first factor will be internal factors including social stability and political stability, which will ultimately affect investment growth. "Waves of demonstration ended in riots urged negative sentiments in the market and causing investors to wait and see," Pingkan stated.

The second factor is the global sentiment such as the economic condition of trande  partners' and foreign investors' countries. "The government must be aware because  economic recession can spread rapidly," Pingkan concluded.

EKO WAHYUDI