Indonesia’s benchmark failed to return to its highest level in four month over concern that China’s pessimistic growth target may drag down demand for commodity exports from Southeast Asia’s largest economy.
The Jakarta Composite Index closed 0.13 percent lower at 5,402.6 at the close of trade on Tuesday (07/03), after flirting earlier in the day with the 4,450 level last seen on Nov. 10.
The benchmark has been rallying so far, having risen 3.1 percent since the beginning of the year, backed in part by a recovery in shares in coal, mining and palm oil producers.
China’s decision to cut its growth target this year to 6.5 percent, compared with 6.7 percent growth last year, however, forced traders to reconsider their position as lower demand from the world’s second-largest economy would hamper Indonesian exports, Nico Omer Jonckheere, Valbury Asia Securities vice president for research and analysis, said, as quoted by Antaranews.com.
China was the single largest market for Indonesian commodities last year, accounting for about 11.6 percent of its total exports. Indonesia’s total exports to China reached $16.8 billion last year, up 11.56 percent from 2015. The main commodities include coal, palm oil, wood pulp, coconuts, plywood, fatty acids and natural rubber.
The mining sector dropped 0.16 percent on Tuesday, with shares in country’s largest coal miner, Bumi Resources, falling by 4.32 percent.
However, UBS Securities Indonesia analyst Joshua Tanja is rather bullish about sectors that focus on Indonesia’s domestic market of more than 250 million people. He said the property, automotive, banking and health care sectors could see increased demand this year, because of the central bank’s policy since last year to keep interest rates low.
An index that tracks 66 stocks in the basic industry and chemicals – such as cement producers and steel work companies – led the drop on the JCI with a 0.71 percent decline on Tuesday. Miscellaneous industry – which includes textile and automotive businesses – followed with a 0.62 percent decline.
About 13.5 billion shares worth Rp 6.8 trillion ($509 million) were traded on the Indonesia Stock Exchange (IDX) on Tuesday. Foreign investors, making up a mere 29 percent of the trading activity, booked a net buy of Rp 87.5 billion.