The stock index continued to rise
The Indonesian capital market has seen new momentum since the beginning of 2018. After climbing by almost 20% in 2017 to reach a level of 6,355.65, the stock market index continued to rise to reach over 6,600 in the third week of January 2018, meaning that in a period of three weeks the Indonesian stock market index climbed by over 3%, an encouraging rise.
The rise in the Indonesian stock market brought the total market capitalization of the index to Rp. 7,250 trillion or roughly over $540 billion, slightly more than half of the Indonesian GDP. The Head of the Indonesian Stock Exchange would like to see the market capitalization reach Rp. 10,000 trillion or around $750 billion, three quarters of Indonesia's GDP, by 2019. Such a vision is certainly not a total fantasy since the potential of the Indonesian economy and its corporations is still quite large.
Of the various sectors in the stock exchange, the financial sector remained the prime mover of the index. Similarly, the basic manufacturing and the consumption sectors also contributed significantly to the increase of the index. This achievement was followed by other sectors that registered positive growth but below the performance of the entire index, including mining, infrastructure and the trade and services sector. At the same time, of the many state-owned companies, only a fraction have gone public, and most of them are doing very well. However, many large state-owned companies are still waiting for the right time to go public. Similarly, many large private companies that have continued to grow are still waiting for the right moment to go public.
In other economic news, the external sector reported another deficit in the trade balance. The trade balance deficit widened from $215.3 million in November 2017 to $270.0 million in December 2017. Indonesian exports fell slightly, from $15,320.2 million in November to $14,791.2 million in December, a decline of $529.0 million or 3.45%. However, imports fell by less in December, declining to $15,061.2 million from $15,104.9 million in November, down $43.7 million or 0.29%. All the declines in exports and imports were most likely due to the year-end holidays.
In the domestic economy, December 2017 was marked by relatively mild inflation of 0.71%. Yearly inflation in December 2017 stood at 3.61%, a level at the lower end of the target corridor of the Central Bank. With inflation largely under control, and with the external sector sanguine, the Central Bank decided to keep the benchmark rate constant at 4.25% at its recent meeting of the Monetary Council in January 2018.
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