JAKARTA—The composite share price index (IHSG) has been growing showing an improving domestic economy, the Director of Development of the Indonesia Stock Exchange (BEI), Nicky Hogan said here.
“The capital market is an indicator of the economy. When the capital market is improving, it is usually a positive sign for the economy and the real sector, and the other way round,” he said on the sidelines of a Shariah capital-market festival event on Saturday.
The improving real sector, especially automotive and property, could also be seen from indicators in the financial markets, especially the capital market, he said.
The characteristic of a capital market, especially the share market, historically precedes the real sector, he explained.
Based on BEI data, the IHSG from early this year to April has risen 5.45 percent to 4,843.18.
“The rate of the IHSG [Indonesian index] is one of the highest in the world. It is only a little below that of Thailand, which is up 8.75 percent,” he said.
Bank Indonesia’s policy to lower its reference rate to 6.75 percent has been greeted positively by capital-market players, especially in the automotive and property sector, because it is closely tied with the credit-interest reduction, Nicky Hogan said.
“The reduction of credit interest will increase the demand in the property and automotive sector and, in turn, boost the performance of issuers in the sector,” he said.
The reduction of credit interest would also cut the corporate-cost burden, although the central banks’ policy could possibly also pose a challenge for companies in the banking sector.
“The credit-interest reduction will pose a new challenge, because it will affect income from interest, and it means banks must conduct breakthroughs,” he said.