Rising Trend Centered on the Energy Sector
[Asia Economy Reporter Gong Byung-sun] While emerging markets have been sluggish due to the bankruptcy issues of Chinese real estate company Hengda Group and the rise in U.S. Treasury yields, the Indonesian stock market showed an upward trend. This is interpreted as reflecting the rise in commodity prices and expectations for the resumption of daily life.
According to Korea Investment & Securities on the 9th, as of the 30th of last month (local time), the emerging market index fell by 4.3%, but the Indonesian stock market rose by 2.2%, breaking above the box range. In particular, the energy sector surged by 32.4%.
The rise in commodity prices positively impacted the Indonesian stock market. Indonesia's main export items are commodities such as coal, ferroalloys, nickel, natural gas, copper, and palm oil. As global supply and demand have become mismatched, commodity prices have recently risen, and export conditions, centered on mining, are improving. Indonesia's exports in August increased by 64.1% year-on-year, and imports rose by 55.3% during the same period. Additionally, China, which recently faced power shortages and began stockpiling coal for power generation, is also purchasing relatively lower-quality Indonesian coal.
Indonesian financial authorities are focusing on domestic demand recovery. At the monetary policy meeting, the financial authorities decided to keep the base interest rate at 3.5% for the ninth consecutive month. So-yeon Lee, a researcher at Korea Investment & Securities, analyzed, “Despite changes in external monetary policy trends, the focus remains on boosting domestic demand,” adding, “Due to weakened domestic consumer sentiment, consumer prices in September rose only 1.3% year-on-year, leaving room for policy maneuvering.”
As Indonesia enters coexistence with COVID-19, the Jakarta index is expected to recover to pre-pandemic levels. Foreign investors have net purchased about $310 million (approximately 370.7 billion KRW) in the Indonesian stock market since September. Furthermore, with vaccine acquisition and a first-dose vaccination rate exceeding 35%, Bali Island will also be opened to foreign tourists starting this month.
Researcher Lee predicted, “The earnings improvement trend of listed companies reflecting this is remarkable,” and “The Jakarta index will break out of the box range in October and settle at the 6,500 level.”
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