Bloomberg reported that Asian equities headed for a higher start today after strong earnings from some industry heavyweights lifted U.S. equities. Chinese stocks pointed to a rebound after a surprise move by the People’s Bank of China to cut the reserve requirement ratio to improve funding arrangements for banks.
Also a boost to investor sentiment in the region is that President Donald Trump had said the U.S. and North Korea had begun direct talks at “extremely high levels” in advance of a planned meeting between the two nations’ leaders this summer.
At the Jakarta bourse, the stock market closed flat on Tuesday (April 17) with buying by domestic investors offsetting the sell-off by foreign investors. Foreign investors booked a net sell of Rp739.71 billion, bringing year-to-date net sell to Rp27.78 trillion.
The composite index of the Indonesia Stock Exchange (IDX) ended down 0.02% at 6,285 yesterday, regained from its correction in afternoon trade. The rupiah also weakened further to Rp13,770 against the U.S. dollar.
Investors at the IDX will also wait for the rates policy as Indonesia’s central bank (Bank Indonesia/BI) is scheduled to make the decision today and tomorrow. BI has for the past six consecutive months maintained the BI 7-day Reverse Repo Rate at 4.25%, consistent with efforts to maintain macroeconomic and financial system stability, while supporting the domestic economic recovery.
The challenge now is with regards to external risks such as growing global financial market uncertainty, and several countries’ tendency to implement inward-oriented trade policy. The domestic risks linked to inflation also persists.
BI published its survey on Tuesday that lending rates is estimated to decline in the second quarter (Q2) of this year. Lending rates for working capital loan will lead to 11.78%, lending for consumer loan will lead to 14.5%, while lending rates for investment loan is predicted to increase to 12.28%. In Q1 of this year, new loans grew slower. But the expected improving economy should boost lending this year. BI predicts 11.7% growth in lending this year, higher than 8.2% last year.
Global economic growth, BI believe, is to accelerate in 2018. Economic gains in advanced and developing economies will drive the global economic recovery. In the developing economies, China is expected to maintain solid economic growth on growing consumption despite economic rebalancing eroding investment, especially in real estate.
The Chinese economy grew by 1.4% quarter-on-quarter (q/q) in Q1 this year, compared to an advance of 1.6% in the previous period, the weakest pace of expansion since the first quarter of 2016. But the Chinese economy advanced 6.8% year-on-year (y/y) in the March quarter of 2018, the same pace as in the previous two quarters, mainly supported by solid consumption, property investment and exports.
Meanwhile The International Monetary Fund (IMF) released its April 2018 World Economic Outlook, saying that the world economy continues to show broad-based momentum. Against that positive backdrop, the prospect of a similarly broad-based conflict over trade presents a jarring picture. IMF projects 2.4% growth for euro area this year, 1.2% for Japan, 6.6% for China, and 2.9% for United States.
By Yohannes Obor
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