Last week, Indonesia’s financial market faced several very positive news, particularly related to the US dollar and future Federal Reserve policies. One of the triggers was the US inflation data, which fell more than expected.
The latest US inflation data showed a decrease to 3%, lower than the consensus target of 3.1%. This was very encouraging news, as US inflation had been quite high in recent months, placing the Federal Reserve in a dilemma of whether to maintain or lower interest rates. This drop in inflation provided a positive boost for the rupiah, which had experienced a significant rally, moving from the 16,200-16,300 range to a new equilibrium around 16,100, with the potential to reach 16,000.
However, there was also worrying news regarding an assassination attempt on US presidential candidate Donald Trump. Many analysts see this event as potentially beneficial for Trump, as he is known as a patriotic figure in America. If Trump is re-elected in November, the impact of his policies on the market should be closely monitored. Trump is known for his bilateral policies and the trade war with China, which previously triggered global inflation.
Trump’s policies tend to increase inflation, which might force the Federal Reserve to maintain high interest rates until next year. However, during his presidency since 2016, the world has been relatively calmer in terms of physical wars, as Trump focuses more on economic negotiations rather than violence.
On the other hand, the announcement from the Budget Agency (Banggar) regarding the 2025 State Budget Draft (RAPBN) showed some important macroeconomic assumptions. The economic growth target is 5.1-5.5% with a deficit between 2.4-2.8%. This aligns with what Finance Minister Sri Mulyani stated earlier, where this year’s deficit increased from 2.3% to 2.7%.
The market conditions in recent weeks have been quite helped by the US inflation announcement. The Jakarta Composite Index (IHSG) moved positively with a potential rally between 7270-7340, and if it stays above 7375, it could enter the 7420 territory. This indicates that the Indonesian stock market continues to gain positive momentum.
In the bond market, the 10-year bond yield shows a bullish trend, tending to drop from 7% to 6.9%, and could even reach 6.8%. This is bullish news for the Indonesian bond market.
For stock market investments, the sectors to be collected are IDX Finance and IDX Cyclical, due to the positive economic growth momentum. In the bond market, bonds with tenors of 3 years, 4 years, and 15 years are good choices, with bullish trends in all tenors.
Technically, this is called Bull Flattening, where the bullish market is driven by long-term bonds.
