ILLUSTRATION. The JCI is predicted to weaken throughout March 2021, this is the reason
Reporter: Kenia Intan | Editor: I knew Laoli
KONTAN.CO.ID – JAKARTA. Composite Stock Price Index (IHSG) fell 47.85 points or 0.76% to the level of 6,241,796 at the close of trading, Friday (28/2).
This weakening held back the JCI movement which tended to strengthen over the past week. Quoting data from RTI Business, on February 22-26, 2021, the JCI moved slightly higher by 0.16%. Just so you know, at the close of trading, Friday (19/2), the JCI was at the level of 6,231,932.
Director of Anugerah Mega Investasma, Hans Kwee, revealed that the still upward trend in US government bond yields and corrections in some of the global stock markets had the potential to suppress the JCI movement in the first week of March 2021.
“The JCI support level is at the level of 6,173 to 6,018 and resistance at the level of 6,302 to 6,350,” said Hans Kwee in a research received by Kontan.co.id, Sunday (28/2).
For your information, the yield on US government bonds will increase in the long term. For a 10-year tenor, the yield rose past the 1.6% level. This is the highest yield in more than a year. Although the 10-year tenor US government bond yield was observed to have started to decline this weekend, the yield position remained above the 1.5% level.
Furthermore, he said that the yield hike was driven by expectations of higher economic growth and rising inflation due to sentiment from the Covid-19 virus vaccination program.
In addition, the potential for US jumbo fiscal stimulus ratification has the potential to boost economic recovery. The large stimulus increased the budget deficit which in turn prompted the issuance of new debt securities with higher yields.
“If the yield on US government bonds continues to rise, it is likely that world stock markets will continue to undergo corrections,” he added.
The increase in the yield on the 10-year US government bond put pressure on the economy as it is used as a benchmark for interest rates on mortgages and car loans. The increase in yield also puts the US Treasury’s benchmark yield above the dividend yield of stocks in the S&P 500 index.
As a result, equity that is considered a risky asset has lost its premium on bonds and is considered more expensive. This triggered a sell-off by investors against stocks, particularly technology stocks, which benefited more from the low interest rate conditions.
The technology sector has been relying on cheap loans to boost growth. Meanwhile, the sectors that benefited from the reopening of the economy experienced an increase in the energy, industrial and financial sectors.
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Reporter: Kenia Intan
Editor: did you know Laoli