Indonesia's Overbought Market Fails to Reach Beyond Next Psychological Level
On Thursday 4 April 2013, market players were hoping that the Indonesia Stock Exchange (IHSG) would climb beyond the psychological level of 5,000. However, the presence of negative market sentiments - and the overbought condition of the IHSG - were used as reasons to engage in profit taking. It consequently pushed down Indonesia's main financial market indicator to the level of 4,922.61, an 1.18 percent fall compared to Wednesday's trading day.
What impacted severely on the IHSG were falling American stock indices due to America's lower MBA Mortgage Applications, ISM Non-Manufacturing PMI, and ADP Nonfarm Employment Change. This negative news was a bit offset by results surrounding the meeting of the Bank of Japan (BoJ). However, closed stock exchanges in Hong Kong, Shanghai and Thailand in combination with mixed openings of European stock markets (that are in anticipation of the ECB meeting) were not able to support the IHSG. Foreign market participants mostly sold their Indonesian assets, while domestic market participants mostly bought.
The IDR rupiah continued its decline as it responded negatively to the statement of Federal Reserve official William Dudley, who said that the bond-buying program might be gradually phased out until it is completely eliminated by the end of this year. This statement made the US dollar gain in strength. Moreover, Japan's central bank decided to step up asset purchases (up to seven trillion yen) to boost the country's economy, thus sending Japanese bond yields to record lows. This statement weakened the Japanese yen and strengthened the US dollar.
| Source: Bank IndonesiaAsian stock markets were mixed (with a declining trend), except for Japan, which gained significantly after Japan's central bank meeting. The decision of BoJ's asset purchases (that include long-term bonds up to 40 years) were taken under the leadership of Governor Haruhiko Kuroda (who has been in charge at the central bank for a number of months), and supported the upward movement of the Nikkei (particularly property and exporter stocks helped to raise the index). India's Sensex index fell deeply after fund managers decided to engage in large-scale sales as they expect companies' performances to weaken.
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