Jakarta. Jakarta stocks closed marginally higher on Monday, with the benchmark Jakarta Composite Index (JCI) adding 7 points, or 0.11%, to 6,525 as investors weighed a hawkish US Federal Reserve outlook, renewed US-Iran tensions and the latest MSCI index rebalancing.

Trading value on the Indonesia Stock Exchange reached Rp 24.6 trillion ($1.38 billion), with 410 stocks advancing, 242 declining and 311 unchanged.

The JCI moved in a narrow range as pressure from global and domestic factors kept investors cautious. Market participants were watching developments in the Fed's policy outlook, geopolitical tensions, oil prices and the impact of the MSCI rebalancing, which took effect on Monday.

The rebalancing could trigger technical selling in stocks removed from MSCI's index constituents, as funds tracking the index adjust their portfolios. Such fund flows could affect the movement of several stocks and add pressure to the domestic market.

Pilarmas Investindo Sekuritas said at least three major factors shaped market sentiment on Monday, including US monetary policy and escalating geopolitical tensions between the United States and Iran.

The first concern was the Fed's policy outlook following hawkish remarks by Fed Chairman Kevin Warsh at the Jackson Hole forum, which raised market expectations that the central bank could increase interest rates in September.

In his speech on Friday, Warsh said US inflation had yet to show a significant slowdown and reiterated the Fed's commitment to bringing inflation back to its 2% target.

He also said current financial conditions were not sufficiently tight, prompting markets to reassess the possibility of further US monetary tightening.

Expectations of higher interest rates could increase the appeal of dollar-denominated assets and weigh on riskier investments, including equities in emerging markets.

The second concern was the escalation in geopolitical tensions between the US and Iran. The US military reportedly targeted Iranian rocket launchers that were said to be preparing to lay mines in the Strait of Hormuz.

“The development has raised concerns about potential disruptions to global energy supplies. Markets are therefore anticipating higher oil prices, which could add to inflationary pressures,” Pilarmas said.

Higher inflation could further limit the room for monetary easing, encouraging investors to remain cautious.

Across Asia, Tokyo's Nikkei 225 fell 0.1% to 66,311, while South Korea's Kospi reversed earlier losses to gain 0.5% to 6,820. Hong Kong's Hang Seng slipped 0.1% to 25,566, while the Shanghai Composite rose 0.9% to 3,986.

On Friday, Wall Street also closed lower. The S&P 500 fell 0.2%, the Dow Jones Industrial Average dipped less than 0.1%, and the Nasdaq Composite lost 0.5%.

Add as a preferred source on Google +