Indonesian stock exchange potentially rise within the week of Bank Indonesia Board committee meeting

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The Intro 

The Composite Stock Price Index (CSPI) still has the potential to strengthen this week in the middle of the Bank Indonesia (BI) Board of Governors Meeting (RDG). Friday (3/15), the JCI rose 0.75% to 6,461.18. Within a week, the JCI rose 1.22%.

BI will hold an RDG from March 20 to March 21, 2019. In this meeting, BI will discuss again the question of whether or not to change the benchmark interest rate. As per market consensus, BI will not raise interest rates.

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Binaartha Securities Analyst Muhammad Nafan Aji Gusta Utama also predicted that BI would keep the benchmark interest rate at 6%. He also continued that on a weekly chart, the JCI movement formed a bullish pin bar pattern which indicated the potential for strengthening next week.

"One of the positive sentiments is related to BI's decision to determine the 7DRR BI. Regardless of the scenario, technically the JCI next week, I project is more likely to strengthen," he explained on Friday (3/15).

In addition to the BI RDG sentiment, Nafan added that the positive attitude from the domestic sector was related to the stability of inclusive and sustainable domestic macroeconomic fundamentals which provided a positive catalyst for the security of the JCI. "Moreover, Fitch Ratings has maintained a BBB rating for Indonesia with a stable outlook. Thus, the stability of domestic macroeconomic fundamentals is essential to maintain the stability of national economic growth," he added.

Also, he also said that the other positive sentiment for the index was the surplus in the trade balance as of February 2019 of US $ 330 million. "Externally is related to the process of fair, free trade negotiations between the United States (US) and China which continues to make sentiment of the trade war subside, as well as the dynamics of Brexit where Brexit extensions are implemented after the British parliamentary vote," he said

Also, Nafan estimates that the US Fed Fund RAte benchmark interest rate will remain at 2.5%. This will indirectly provide positive sentiment for the IHSG next week. He also predicts the JCI will strengthen next week with support and resistance at the level of 6,330 to 6,540.

Panin Sekuritas analyst William Hartanto revealed the JCI's potential to strengthen was influenced by trade balance sentiment. Besides, no other sentiment needs to be watched out, aside from BI sentiment. The JCI will remain at the average level if the benchmark interest rate is raised or stays at 6%.

The decline in benchmark interest rates is considered to strengthen the JCI while the market hopes that BI will no longer need to hold interest rates because the Fed is now dovish.

William also recommends investors to pay attention to market responses. "It can be seen from the movements of large bank stocks because these issuers are related to BI," he explained.

William predicts JCI will be in the range of support at 6,400 and resistance at 6,520.

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