Jakarta. Indonesia’s current-account deficit likely widened in the second quarter of the year to 2.3 percent of gross domestic product, a central bank official said on Wednesday.

Mirza Adityaswara, Bank Indonesia’s senior deputy governor, told reporters that foreign companies had been repatriating dividends abroad in the last three months, cancelling out surpluses from the country’s external trade in the current-account balance.

Indonesia’s current account, which records all goods and services trade, income transfers and remittances, recorded a deficit of 1.85 percent of GDP in the first quarter, narrowing from 2.95 percent of GDP at the end of last year.

Agus Martowardojo, Bank Indonesia’s governor, said on Wednesday that the country’s current account was in “a good and guarded condition.”

The central bank expects the trade surplus to help lower the current-account deficit to less than 2.5 percent of GDP for the full year, Agus said.

The country recorded a seventh straight monthly trade surplus of $477 million in June, narrower than $950 million a month earlier, the Central Statistics Agency (BPS) announced last week.

“Still, we remain vigilant about external conditions,” Agus said. “We must anticipate the market’s confidence in China and our emerging-market trading partners.”

Exports to China and Southeast Asia accounted for 30 percent of Indonesia’s non-oil-and-gas exports in the first half of 2015. Exports to China declined to $6.65 billion, down 26 percent from the same period last year, while exports to Southeast Asia fell 4.8 percent to $13.8 billion.

Declining exports are exacerbating the deficit in the current account, which in turn makes the country dependent on financing from abroad through direct investment, loans or portfolio investments. The latter could leave Indonesia in a hurry should the domestic economy deteriorate or better returns present themselves elsewhere, creating volatility in the currency and financial markets.

Still, debt-rating agency Fitch said last week that Indonesia and its so-called “fragile five” peers – Brazil, India, Turkey and South Africa – were not as vulnerable as smaller-sized emerging economies to capital outflow risks stemming from an expected US Federal Reserve interest rate hike later this year.

“Fears about a sudden reversal of capital inflows to EMs may be overdone. Perceptions of huge inflows generated by ultra-loose US monetary policy may be misplaced,” Fitch said. The agency noted that US capital outflows were lower during quantitative easing than in 2004-2007.

Fitch said narrowing the current-account deficit and boosting the foreign exchange reserve would help Indonesia fend off the shock. “Credibility of the macroeconomic framework and policy response” would also be important in mitigating the risk, it said.

Bank Indonesia is always in the foreign exchange market, especially when the rupiah is undervalued, Mirza said.

The rupiah is trading at 13,368 to the US dollar, down 7.46 percent for the year. The currency is trading near its lowest level since August 1998.

GlobeAsia

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Stock quotes are seen at the Indonesia Stock Exchange on April 1, 2015. (Antara Photo/M Agung Rajasa)

Jakarta. President Joko Widodo may have set a forecast on Indonesia’s stock market, but some analysts are more conservative in their targets for this year.

The president on Tuesday said that the benchmark stock measure, the Jakarta Composite Index, could reach record highs further, above 6,000 — a milestone that “would be great.”

“We have to be confident, must be optimistic that the economy will be better in the future,” Joko told reporters after meeting with Indonesia Stock Exchange president director Ito Warsito.

The JCI closed on Tuesday up 0.8 percent at an all-time high of 5,523.29, but ended Wednesday down 0.7 percent.

Andrew Argado, chief analyst at Recapital Securities, is pegging the JCI at hitting 5,850 by the end of the year.

Still, he said the president’s target is “possible,” adding that the economy could improve on the back of lower global crude oil prices, Indonesia’s improving trade balance and low inflation.

“I think it’s not nonsense. It might happen,” Andrew said.

“Investors will see this as a form of optimism. Jokowi is optimistic with his fiscal policy. I see the positive side that he wants to build optimism for local and foreign investors,” he said, referring to the president by his nickname.

Reza Priyambada, head of research at Woori Korindo Securities Indonesia, says the president’s forecast will not have much of an effect on investment strategy for investors, adding that Joko’s calculation was “unclear”.

“He already promised many positive things to market players. Could it be a reality? Will it be followed by an acceleration in investment and infrastructure? Market players are waiting for the realization of the president’s promises,” Reza said.

Woori has a moderate year-end target for the JCI — at 5,700 to 5,800.

Reza says, though, that it is possible for the JCI to reach 6,000 at the end of this year only if the government accelerates infrastructure development.

Indonesian stocks have gotten a boost in the past couple of months after the central bank, Bank Indonesia, cut its key interest rate — the BI policy rate — by a quarter of a percentage point to 7.50 percent, in a bid to boost economic growth. Indonesia’s economy has been flagged by a current account deficit and a weakening rupiah. One of the biggest hopes for the economy is fast-tracking projects for infrastructure, such as the construction of airports, seaports, highways and railroads.

Infrastructure-related stocks have been outperforming the benchmark. The index that tracks construction, property and real estate stocks has gained 13 percent since the start of the year, compared to the JCI’s 5 percent advance.

Indonesian Stock Analyst Association secretary-general Haryajid Ramelan said the president’s gesture for setting a target, even if there was no specific timeframe, was a “good thing to do to add more confidence for market players.”

“It will have a good outcome temporarily,” he said. “It’s very possible because some analysts, including myself, believe in Indonesia’s economic prospects, and that will bring the JCI to 6,000.”

Technical indicators suggest that the index will reach, or even exceed 6,000, Haryajid said. It would take the index to gain 9.4 percent from Wednesday’s close to reach 6,000.

Muhammad Alfatih, the head of research at Samuel Sekuritas, also gave his support for all-time highs.

“It’s only a matter of time,” he said. “From 2013, 2014 until now, we from Samuel Sekuritas saw the pattern and targeted the JCI to reach 6,000 or even 6,300.”

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