Analyst: Stock Market Will Have A Positive Impact If BI Maintains Rupiah Stability

JAKARTA - Senior Portfolio Manager Equity PT Manulife Aset Manajemen Indonesia (MAMI) Samuel Kesuma said that the stock market will have a positive impact as Bank Indonesia (BI) focuses on maintaining the stability of the rupiah currency.

"We see that BI will continue to maintain high interest rates until there is a cut in the Fed interest rate. The premature decline in BI interest rates has the potential to pose a risk to the volatility of the rupiah," Samuel said in Jakarta, quoted from Antara, Tuesday, May 21.

He explained that BI's efforts to raise interest rates by 6.25 percent at the end of April 2024 were an anticipatory policy in creating a cushion for the rupiah if global risk-off sentiment continued.

"Based on previous experience, rising interest rates can help slow down rupiah exchange rate depreciation," said Samuel.

He continued that what will be of concern to market players in the future is how long the condition of the high interest rate will last.

According to him, the Fed's opportunity to lower interest rates this year will open up BI opportunities to participate in lowering its benchmark interest rates, so as to minimize the impact of the interest rate hikes that have occurred.

On the other hand, he said maintained economic fundamentals would support investor tastes to choose Indonesia as an investment destination, amid continued geopolitical tensions in the Middle East and the Fed's potential delayed rate cuts.

The financial fund that is maintained and has low valuation opens up opportunities for investors who want to invest early in taking advantage of conditions towards the end of the cycle of interest rate hikes. The direction of the new government's economic policy and the choice of a credible cabinet can also be a positive catalyst going forward," said Samuel.

Meanwhile, he continued, the impact of interest rates on the company's fundamental conditions will depend on the financial condition of each issuer, such as debt levels, types of debt (floating or fixed), as well as plans for future capital expenditures.

For opportunities in the stock market, according to him, investment managers can take advantage of opportunities in sectors whose revenues are in US dollars and companies with more limited debt.

"For the Composite Stock Price Index (JCI), MAMI projects to reach the level of 7,800 by the end of the year," said Samuel.

From Asia, Samuel explained that strengthening the Asian stock market was helped by the optimism of the Fed's lower interest rate at the end of the year, in which the last Fed Chairman Jerome Powell's statement indicated that it would most likely not raise interest rates, and the next policy indicated a cut in interest rates.