Winds of Change
JCI jumped on Friday as the market appreciated the meeting between the elected president Joko Widodo with his former rival Prabowo Subianto. The meeting was seen as an elixir which relieves concerns over potential efforts to thwart the inauguration of the new president on October 20th. As the two met, the political tension seemed to have eased considerably, triggering a new hope that the next government will be able to run smoothly.
While the tension has been reduced, risk remains until the event is completely passed. Should the inauguration day ends smoothly, the JCI is expected to gain the upper hand and we may even see the index to erase recent losses and continue its march north.
USDIDR turned higher on Friday, up from 12,207 to 12,222.
BJBR set Taufiequrachman Ruki as the candidate for the position of President Commissioner. The candidacy of the former KPK Chief has been submitted to OJK, awaiting result of the fit and proper test.
Stimulus Hope
European Central Bank official said that the central bank will start “within the next days” to purchase assets in a new program aimed to support the economy. The statement launched the European stocks higher.
A day earlier, Fed’s James Bullard said that the FOMC should consider delaying the end of bond-buying.
We should note that the conditions in the US and Europe are not the same, and that Europe needs the stimulus while the US might have enough of it.
US University of Michigan Confidence index for October (preliminary) went up to 86.4 from 84.6, defying consensus of a drop to 84.0. Not only it was an upside surprise, the figure was actually the strongest since July 2007.
Technically Speaking...
JCI climbed back to regain its footing above 5k mark. The index managed to hit the intraday high at 5,043 on Friday, closing just above the 100-day EMA.
Downside, the 200-day EMA at around 4,900 will be the near-term cushion for the JCI, while subsequent support area lies at 4,835-4,840 (prior congestion area).
On the upside, 5,100 is the next resistance, followed by 5,150, 5,200 and another one at 5,251, ahead of the all-time record high at 5,262.
The MACD continued to tick higher, approaching the zero line. The RSI has started to curl back up.
We expect the upside potential remains intact on Monday and we could see the index heads toward 5,100 and possibly all the way to 5,150.
It looks like WSKT will have to be scrapped soon as the stock reco is currently closer to its target price at 1,000. For now, we are keeping it open, however.
Week Ahead
Monday will be the inauguration day for Joko Widodo, the 7th president of Indonesia. The market will cheer if everything goes smoothly, defying some worries that the inauguration day will be “sabotaged” by some people. We expect the inauguration will proceed smoothly. A day afterwards, the president is expected to announce his cabinet, which could be closely watched by investors.
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