Rate Surprise
- In another surprise move, Bank Indonesia raised its rates to 7.5% on Tuesday, in a bid to reduce current account deficit, weakening rupiah and easing up inflation. Deposit facility rate was also raised to 5.75% from 5.5%.
- The price that BI has to pay will be in the form of slower growth as borrowing cost rises. Credit and import are also expected to be curbed. At the end of 2Q13, current account deficit was 4.4% of GDP, while the 3Q13 deficit is seen around 3.7% to 3.8% of GDP or $8.4b. This however, lower from $10b recorded in 2Q13.
- GDP itself was up 5.62% in 3Q13, YoY, slower than 5.83% recorded in 2Q13. BI’s forecast GDP for the entire 2013 at 5.5%-5.9% and for 2014 at 5.8%-6.2%.
Eyes on BI
- The Dow fell as profit-taking set in after the index roared to new heights earlier.
- No crucial data is set for release on Wednesday, but the aftermath of BI’s rate move will put more weight on domestic data as no surprises are expected on the Federal Reserve’s side.
Technically Speaking...
- Rate hike brought down JCI to 4,371, cracking the support at 4,403. This triggered the zigzag decline from 4,611. This zigzag structure aims at 4,365 first, then 4,286 and 4,157 should the next big support and 4,313/14 fails to hold.
- EMA-band now will become the near-term resistance, until the recent high at 4,611 is tested ahead of 4,791 key resistance.
- We are somewhat within a large consolidation range between 4,791-4,313 but with a negative bias as the index is now below its EMA-band. MACD has turned lower again while RSI is approaching the oversold area.
- ADHI hit its stop level, exit at 8.67% losses.
Day Ahead
BI rate shocker was a game changer as it underlines its priority on current account deficit reduction and helping the ailing rupiah. Sectors clearly hit will be finance and property as they fell 2.82% and 2.78%, respectively. As there is no clarity on when the BI can achieve its CA target, these two sectors are likely to be vulnerable for some time.
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