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00:00 Welcome back to C2A Business. The Indonesian stock market has been seeing some bearish
00:06 sentiment amid the rising tensions between Iran and Israel, coupled with uncertainties
00:12 over the Fed rate cuts. The IDX plunged by 1.68% to 7,164.6 on Tuesday, the 16th of April,
00:24 during the first trading day after eight holidays, marking a substantial drop from its last
00:29 record high level of 7,433 it hit in mid-March. This came amid various negative sentiments,
00:38 including heightened Iran-Israel tensions, Fed rate cut uncertainties, and the rupiahs
00:43 dropped below 16,000 per US dollar. And an update on the tensions. Earlier this morning,
00:53 US officials have said that Israeli missiles have hit Iran. On early Friday morning, explosions
01:00 were heard near a major airbase and nuclear facility near the city of Isfahan. Earlier
01:07 today, gold prices shot up above US$2,400 per ounce, following reports of the strike.
01:17 So how will the escalation in tensions on top of Fed rate uncertainties impact the IDX?
01:23 Now to discuss further, joining me today is Edvisor Provina Fisindo, CEO, Praska Putpantjo.
01:30 Thank you for stopping by at C2A Business. So to start off with what's happening in the
01:36 IDX and also amid the geopolitical tensions, the rupiah has gone quite low after its four
01:42 year drop this week and we just opened the market again after the E-Break. So could you
01:48 tell us about the performance of IDX within this week?
01:51 Okay, thank you. The performance of IDX since the first trading from eight holidays. I see
01:59 the market is so volatile and as we can see from this picture that the trend of GCI is
02:07 in downtrend in the short to medium trend. From this picture we can see that the market
02:13 from the closing by 17th April, we see that the market is closed on the support level
02:25 by 7135 and now from the first session of today the market is down more than minus 1.45%
02:38 this day on the first session of trading and we see that the market will continue its bearish
02:45 trend up to strong support to 7038 level. This is because by the rising tensions, geopolitical
02:57 issues and also the potential rising of inflation globally because the rising commodity price
03:06 especially from metal and also energy.
03:09 Alright. Now I mean if we look at the geopolitical tension it seems like it's very much uncertain
03:14 especially what Israel would do to Iran after its retaliation attack to Israel. So and this
03:20 morning we had this news as well, Israel had hit Iran in Isfahan. So how will this impact
03:26 the IDX now and how are the big issues that are potentially affecting the Indonesian if
03:31 there are other issues that will affect Indonesian stock market?
03:34 Okay from the first response in the news earlier today about Israel response to Iran, I think
03:46 it will increase more uncertainty issues in the capital market because the retaliation
03:56 attack by Israel will create new uncertainty issues in the commodity price especially in
04:05 oil price because it will create a higher oil price level and also the inflation globally
04:15 will also rise up if the commodity price and also metal price rise up together. And by
04:24 this week we conclude there are four big issues in the capital market in Indonesia especially
04:33 in stock market. The first is heating geopolitical tension and the second is China GDP released
04:40 more than expected on 5.3% in the first quarter of this year, beating expectation at approximately
04:50 5%. It will also support the commodity prices especially energy price because China is one
04:57 of the biggest oil consumers in the world. And the third is strengthen of the solar also
05:04 push the market down because it will create a new uncertainty in the prospect of potentially
05:10 lower interest rate this year and that will be delayed because if the currency of rupiah
05:20 keep on pressure. And the last is panic selling since the geopolitical tension keep continuous.
05:29 Alright, okay now I'm interested to also ask you about the impact of foreign capital flows.
05:35 Yeah, okay the impact in equity market I think it's already responded by the net sales of
05:44 foreign investors. First of all we can see the response of foreign investors in government
05:50 bonds, it shows the declining trend from the first of this year where the number of foreign
06:01 ownership in government bond has shrink at least 37 trillion. So now it's just left around
06:11 800 trillion rupiah and it also happened in equity market where in last month foreign
06:22 investor in equity market in GCI has reduced around 9 trillion in just in one month.
06:29 That's pretty declined. Yeah, so it shows that the impact of rising geopolitical tension
06:37 and also the rising price of energy especially in oil and the sanctions of Russia metal commodities
06:45 such as aluminum, copper and nickel. It will create another new worry over the potential
06:56 next higher inflation just like happening in 2022.
07:02 That's correct. Okay, now you mentioned about China's GDP rate that is actually above the
07:09 expectation which is reaching 5.3% and it's increased. So how does this affect the Indonesian
07:18 market?
07:19 Okay, by the number of this better China in GDP number I think it should be actually a
07:26 good news for capital market but because it happens constantly with the rising tension
07:32 of in the Middle East between Israel and Iran maybe it's also followed by Lebanon. I think
07:44 it will create the price of energy supported to rise higher especially in oil price. Because
07:59 China as I mentioned before it is one of the biggest oil price consumers in the world.
08:06 That's why by the better economic data of China it will create the confidence in the
08:15 oil market to make the price higher. If the price of the oil keep continue to a higher
08:24 level I think globally it will create another higher level of inflation either it's in the
08:33 US and also in Indonesia. That's why just like we can hear in the news before that if
08:44 there is a huge rising oil price it will cut the prospect of our GDP number up to 4.9%
08:52 below 5%.
08:53 It's a pretty huge impact on that. Okay, so looking at the positive side. So what are
08:59 the sectors that are still prospective if we want to look at it and with this very uncertain
09:04 current conditions?
09:05 Okay, I think besides there are more bad issues caused by the rising energy price especially
09:14 oil price. And it makes the hope of a lower interest rate I think will be delayed up to
09:21 next year 2025. Because the Federal Reserve last night stated that it will keep
09:28 watch until September of this year. I think the prospective sector in the Indonesia capital
09:37 market, in equity market, there are four sectors. I think the first is energy and the second
09:44 is basic material on the export basis. The third is infrastructure and the fourth I think
09:51 is still on financial sector. Why on financial sector? Because especially in banking sectors
09:58 because I think by the higher interest rate in the market and the issuers of banking industry,
10:10 it will be the prospective alternative, I mean stock picks for investors. Because in
10:20 the long term, banking industry will play more role in our GDP growth in the long term.
10:33 That's why when the market is down, stocks in financial sector especially in banking
10:39 will be a good alternative for investors.
10:43 Alright, now talking about the Fed rate cuts, US inflation remains high, increasing worries
10:48 of the delayed Fed rate cuts and you mentioned that it's probably just going to be happening
10:53 in 2025. So how is this affecting Indonesian market? Or at least has it been affecting?
11:00 Yes, I think if the interest rate is delayed for the lower level, I think it will create
11:09 more uncertainty, especially more pessimistic over the growth of our economy. Why? Because
11:20 I think firstly in this year is the year of hope where the interest rate will be lower
11:27 and to support economy will grow more than 5%. But if the inflation, I mean, rise more
11:37 than expected and it pushes the GDP growth lower, I think it will be bad for our capital
11:44 market and of course our overall economy will be like, I mean, will be postponed for the
11:53 growth to next year where the potential lower interest rate will be happened.
12:01 Okay, now we know that rupiah has been quite on a decline and today it remains at around
12:07 16,000. So what about the impact of this weakening rupiah?
12:13 There are two sets of impact for the exporters, issuers. I think that's a good issue because
12:23 when the rupiah is weakening, I think they can create a higher value of revenue by exporting
12:31 their commodities. But it will create also negative impact for our economy because many
12:40 of our industry import the capital goods from overseas. So it will create push inflation,
12:49 I mean, push inflation. So the inflation is caused by importing goods because the importing
12:58 goods will be much expensive than before because of the weakening rupiah.
13:05 Certainly there's a lot of happenings that we have to look forward as well because the
13:09 uncertainties keep happening now and we don't know how it will actually end. But thank you
13:15 so much, Mas Preska, for having the enlightenment on what's going to happen in the IDX and also
13:21 hopefully next week it will be improving. Thank you so much for coming to see today's
13:25 business. All right, we're going for a break. After that, we'll have an in-depth recap of
13:31 the IDX in today's first session. So we'll be right back after the break.
13:34 [MUSIC PLAYING]