>From CLSA: Take the example of Indonesia. This market has certainly succumbed to more of an inflation scare so far this year. Thus, Indonesian headline CPI inflation accelerated to a 20-month high of 6.96%YoY in December, up from 6.33% in November. While the Jakarta Composite Index (JCI) corrected by 8.7% in four trading days to a three-month low of 3,455 on 10 January (see Figure 3). CLSA’s technical analyst Laurence Balanco is of the view that the break below 3,500-3,506 level has opened the way for a move down to the 200-day moving average of 3,246 (see CLSA research Price Action Derivatives, 11 January 2011).
Investors have been unnerved by Bank Indonesia’s continuing reluctance to raise interest rates. Indeed it has not raised interest rates since August 2009. Still GREED & fear has to admit to a certain sympathy with the Indonesian central bank since it is clear that the price pressure is primarily food driven and also primarily supply-side driven, aggravated by recent wet weather and related logistical difficulties courtesy of Indonesia’s poor infrastructure. Indeed Bank Indonesia has stated that 70% of the 0.92%MoM rise in monthly prices in December related to food. While core inflation, the central bank’s formal target, actually declined by 3bps from 4.31%YoY in November to 4.28%YoY in December http://www.financeindonesia.org/showthread.php?1443-Review-IHSG&p=7573&viewfull=1#post7573 regards, D
