Inflation reported to decline, S&P 500 closes up 2.67%

The United States stock market S&P 500 closed up 2.67% during last week's trading, almost touching the 4000 level. The United States inflation report showed a decline of -0.1% in December compared to the previous month, and this figure was in line with market expectations. This decline in inflation is a positive catalyst for the market, because efforts to increase interest rates by the Fed are starting to show results in calming the economy. Market participants expect a slowdown in interest rate increases to as much as 25 bps at the Fed's next meeting in February. Apart from that, last week's increase was also supported by fourth quarter financial reports from the banking sector, including JPMorgan, Bank of America, Citigroup and Wells Fargo. The majority of banks reported performance above consensus expectations. The Consumer Discretionary sector experienced the highest increase of +5.76% last week, followed by the Technology sector at +4.6%.

Rupiah exchange rate strengthens more than 3%

The value of the Rupiah has strengthened by more than 3% over the past week to around 15,150. This is in line with expectations that the central interest rate of the United States, The Fed, will be more moderate. The majority of market players currently expect the Fed to only raise its benchmark interest rate by 25 bps at its February meeting. Apart from that, this strengthening is also a response from investors from Bank Indonesia Consumer Survey data in December 2022 which indicates consumer confidence in economic conditions has increased compared to the previous month. The Consumer Confidence Index (IKK) was reported at 119.9, higher than the level of 119.1 in November 2022. The strengthening of consumer confidence in December was driven by the Current Economic Conditions Index (IKE) which recorded an increase in all its constituent components, especially the Index. Current Income.

Revision of Export Proceeds Foreign Exchange Rules to Strengthen Foreign Exchange Reserves

The Coordinating Minister for the Economy plans to revise the regulations regarding Export Proceeds Foreign Exchange (DHE) contained in Government Regulation (PP) Number 1 of 2019. This regulation requires exporters to deposit export proceeds (DHE) within the country within a certain period of time. However, currently it only applies to the mining, plantation and forestry, and fisheries sectors. The revisions made will include several other sectors, including the manufacturing sector. This change was made in order to increase the country's foreign exchange reserves. With higher foreign exchange reserves, it can strengthen Indonesia's external conditions to face future global pressures.

Key Takeaways:

The United States stock market index S&P 500 closed up 2.67% on trading last week, driven by declining inflation in December in the US as much as -0.1% compared to the previous month. Investors assess This decline in inflation is a positive indicator for the Fed to slow down future interest rate increases. In addition, various banks in the US released fourth quarter financial reports, where the majority report performance above consensus expectations.

For the domestic economy, the Rupiah exchange rate strengthened by more than 3% throughout last week, to around 15,150. Apart from being driven by expectations of a slowdown from the Fed, the strengthening of the rupiah was also influenced by the Consumer Survey report Bank Indonesia indicated an increase in consumer confidence to economic conditions, especially from the increase in the Current Income Index This. The Coordinating Minister for the Economy plans to revise the regulations regarding Export Proceeds Foreign Exchange (DHE) is believed to be able to increase foreign exchange reserves country, in order to strengthen Indonesia's external conditions to face future global pressures.

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