JAKARTA – The majority of economists and analysts surveyed are optimistic that Bank Indonesia (BI) will cut its benchmark interest rate by 25 basis points (bps) to 5.5% at this month’s Board of Governors Meeting (RDG).

According to a consensus compiled by Bloomberg, only 11 out of 32 economists and analysts expect BI to keep the rate unchanged at 5.75%.

Rully Arya Wisnubroto, Head of Research and Chief Economist at Mirae Asset Sekuritas, acknowledged that hopes for a rate cut have been one of the main drivers behind the strengthening of the Jakarta Composite Index (IHSG) since last week.

“In addition, globally there are easing concerns over an escalation in the trade war,” Rully said on Wednesday (21/5).

Meanwhile, Fath Aliansyah, Head of Investment Specialist at Maybank Sekuritas Indonesia, said the rise in the IHSG in response to expectations of a BI rate cut should have already been priced in over the past few trading days.

“Actually, this narrative has already started to be reflected in the market, so the upside is not too big,” said Fath.

Fath added that transactions in the regional market yesterday had stabilised, with trading value at IDR 14.8 trillion. Although by the end of the session, foreign investors recorded a net sell of IDR 406.19 billion.

“As long as the net sell is not too significant, it's actually quite normal,” Fath added.

Technically, the IHSG remains in an overbought phase according to Ratna Lim, Analyst at Phintraco Sekuritas. In addition, the Stochastic indicator shows signs of a pullback and the MACD appears to be moving sideways.

“It is estimated that the IHSG will consolidate within the range of 7,050–7,180,” Lim said in her research note today. (KR/ZH)