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Global Economic Slowdown, Cut Rates Eveywhere!

The price of oil is not even funny anymore at this point, the global economic starts to feel the contraction and the slowdown. The Federal Reserve decided to keep the current interest rate unchanged, with federal funds rate at 0.25% to 0.5% in to anticipate the slowdown in China and the price of oil, which have created a nail biting situation among investors1. The Swiss National Bank also keeps the interest rate unchanged, which is at their record low of between -1.25% and -0.25%2. Bank of England also keeps the interest rate unchanged due to its slow growth on the second half of last year and a rough start of 20163. On another note, Norway’s central bank cuts their key interest rate to a record low of 0.50% and a possibility of further cuts in the future due to the lower price of oil which impacted Norway’s oil and gas industry to slowdown4. In Indonesia, the Central Bank decided to cut their interest rate by 25 basis point to 6.75% due to the economic slow down5. The slowdown is caused by the lower commodity prices and falling export, this decision will benefit the “real” sector of the economics in Indonesia – and the rupiah is already strengthening against the USD.

On another note, analyst from Macquarie Bank Ltd. Said that the South East Asia country of Malaysia, Indonesia and Australia may be the short term beneficiaries of weaker USD. Their forecast on the USD have pared-back due to the Feds decision on the interest rate, which can cause a weaker dollar in the next three months’ period. According to them, the USD may weaken up to Rp. 12,600 in the next three months, which is very optimistic – For Indonesian. All in all, Macquarie is known for the second-most accurate forecaster for emerging Asia Calls6.


A defensive investment would be a wise choice to make, during these times of troubles, gold would be a nice investment to have to hedge the position on any other investment that may have a higher uncertainty than gold. Investment in the Indonesian Stock Exchange would benefit from Oil and gas company, such as Elnusa tbk. (Ticker: ELSA) due to the discussion of major oil producers to freeze output that will happen next month, ELSA have increased 12.35% on Thursday. Another interesting stock to watch is Indika Energy Tbk. (Ticker: INDY) which increased well over 20% on Thursday alone. Construction company may as well be a good keep during this time because of the many tollway projects around Indonesia, an interesting movement from Nusa Konstruksi Enjiring Tbk. (Ticker: DGIK) have risen 8.45% on Thursday, which is the highest on its sector, and of course choices of Government owned construction companies such as Wijaya Karya (Ticker: WIKA) and Waskita Karya (Ticker: WIKA) which both have risen more than 1.20% on Thursday. 
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