Tuesday, 28 August 2012


The Moneymarket

Rupiah exchange rate value against USD last Thursday (12/7) was closed to weaken by 30 pints (0.31%) to the level of Rp 9,440/Rp 9,450 against the previous position of Rp 9,410 – Rp 9,420. Weakening of Rupiah was on account of negative external sentiment where there was mounting anxiety of global economic slowdown. The sentiment was triggered by release of minutes of The Federal Open Market Committee (FOMC) which stated that the Fed had slashed America’s growth percentage for 2012.

Assumption of America’s GDP was lowered to the level of 1.9% to 2.4% against the previous target of 2.4% to 2.9% for 2012. Consequently Rupiah reached its lowest position of Rp 9,480 and strongest level of Rp 9,430 per USD.

At the same time Bank of Japan (BoJ) also slashed economic growth rate of Japan. Assumption of Japan’s GDP was also slashed to become 2.1% for 2012 against the previous assumption of 2.3%. The same was with Bank Indonesia who slashed Indonesia’s economic growth rate from the range of 6.3% - 6.7% to the level of 6.1% - 6.5% for 2012.

Furthermore Rupiah was also having negative pressures from lowered interest rate by the Bank of Central Korea and Brazil who also expressed investor’s anxiety over the present global economic condition. The South Korea Central Bank lowered their interest rate by 0.25% to the level of 3%, while the Central Bank of Brazil lowered their benchmark rate by 0.50% to the position of 8%.

Anxiety over adverse condition in Europe also worsened as Italian Prime Minister stated the possibility of Italy needing bail out at unpredictable time. Global economic condition was getting less favorable as economic data released by Australia also made sentiments worse.

Unemployment level in Australia rose to the level of 5.2% for June 2012 against the previous 5.1%. All the negative sentiments strengthened position of USD and posed as pressure on rival currencies particularly those in Asia including Rupiah.

All in all Rupiah strengthened against main currencies including Euro. Index of USD strengthened to 832,589 against the previous 83.568. Against Euro USD strengthened to USD 1,2211 against the previous position of USD 1,2236 per Euro.

Bank Indonesia noted that accumulatively Rupiah exchange rate value in Quarter II-2012 was still depreciated. However BI assured that the depreciation was still within controllable volatility compared to previous quarter. According to BI Governor Darmin Nasution, that Rupiah was under control was thanks to stabilization policy adopted by BI.

On point-to-point basis Rupiah weakened by 2.65% (q to q) to the level of Rp 9,393 per USD or weakening by 2.17% (q to q) on the average to become Rp 9.277 by end of June 2012. Pressures on Rupiah was caused by crisis in Europe which increased demand for USD as related to rebalancing of portfolio by non-residential players. Besides, demand for USD at home also increased due to increased import.

In this case BI continued to take measures to maintain balance of foreign currency market or development balance of foreign currency market or development of foreign currency as instrument to fundamentally stabilize Rupiah value in line with moving curveline of currencies of the Asian region.

Only trouble was, BI had to slash Indonesia’s growth projection from the previous 6.3% - 6.7% to become 6.1% - 6.5% in line with worsening global economic condition. With declining export, economic growth by quarter III-2012 was estimated to be 6.1% - 6.5% or in the range of 6.1% - 6.5% in the entire year 2012.

It was only reasonable for BI to be on the alert of global economic trends which were signified by notable downturns and uncertainty; crisis in Europe might need a long time to recover in spite of signals of progress from the European Union Summit sometime ago.

Weakening of global economy had its negative impact on growth of Asian states like China and India who were Indonesia’s trading partners. Meanwhile prices of global commodities including prices of imported goods continued to drop in line with lessened global demand.

Somehow BI signaled that Indonesia’s economy would remain strong thanks to domestic demand whether consumption or investment which were satisfactorily growing. All sectors were predictably growing well. The sectors which were expected to be the propeller of economic growth were among others: transportation and communication, trading, hotel and restaurants, and industry.

Revision of economic growth projection by BI was rated as natural but a little ambitious, because by maintaining growth rate above 6,5% was rated as unrealistic to consider that many other countries were slashing their growth projections percentage in large magnitude.

China whose growth target last year was still 9.5%, this year set target at only 7.5%. Meanwhile China’s growth performance in quarter I of 2012 was 8.1%. India was even worse, in quarter 1-2012 only grew by 5.1% and inflation was 10.4%. If China and India – who used to have high growth record had to be severely corrected this year, it was completely not sensible for Indonesia to set target growth higher than last year’s 6.5%.

Many analysts and economists estimated Indonesia’s growth this year would be much lower than expectation, in the range of 6.0% - 6.3%. The principle was: as long as growth was 6% it was good enough.

Based on BI’s mid-rate last weekend, Rupiah was traded at the level of Rp 9,403 per USD or weakening by Rp 20 against the day before at Rp 9,383 per USD. To consider BI’s policy which maintained BI rate at 5.75%, Rupiah weakening could be kept from falling any further so it was reasonable if there was room for Rupiah to strengthen this week in the range of Rp 9,375 – Rp 9,450 per USD.

BI was suspected to tightly safeguard Rupiah value by making intervention at the moneymarket. This was indicated by the position of forex reserves which shrunk to the level of USD 106.5 billion by end of June from USD 111.53 billion by end of May 2012. The amount of forex reserves was still sufficient to finance five months of import and paying Government’s overseas debt. The figure was stipulated by the International Monetary Fund (IMF) who stipulated that forex reserves must be at least enough for financing three months import and paying Government’s overseas debt. Besides BI’s intervention at the moneymarket, lessened forex reserves was also caused by export value which was showing downturn in the past few months.

The Capital Market

Index of IHSG last Thursday (12/7) dropped by 35 points following acts of profit taking by foreign investors. Many of foreign commodity shares were released by foreign investors. IHSG was closed to fall by 35.013 points (0.88%) to the level of 3,984.120 Meanwhile index of LQ45 was closed to weaken by 8.210 point (1.20%) to the level of 680.861 while index of Jll fell by 1.5%.

Downturn of index was triggered by shares of the mining sector which dropped by 2.2%, followed by shares of the industrial sector 1.8% and shared of the basic industry sector 1,7%. Strengthening was only in the infra structure sector 0.07%.

Meanwhile shares of the Wall Street stock-maeket ended weak on account of warning that there would be slowdown in performance of technology-based existents, rally of shares of Proctle and Gambler served as supporter to Dow Jones.

Index of Dow Jones weakened by 31,16 points (0.25%) to the level of 12,573.27. Index of Standard & poor’s 500 dropped by 6,69 points to the level of 1,334.76 Index of Composite Nasdaq lost 21.79 points (0.75%) to the level of 2,866.19.

Meanwhile movement in the regional stockmarkets were varied: index of Nikkei inched up by 8.01 points (0,09%) to the level of 8,728.02 and index of KOSPI strengthened by 4.64 point (0.26%) to the level of 1,790.03 while index of Hang Seng (HIS) dropped by 1,9%, index of Nikkei slumped by 14%, index of STI inched down by 0.4%, index of Shanghai dropped by 0.4% and index of ASX inched down by 0.7%.

Some central banks in Asia had become focus of attention with policy of the Bank of Japan and Bank of Korea today. The Bank of Japan, as it was impossible for them to change their interest rate which was already too low, would consider whether they should expand their asset buying program.

Toward decision making, financial shares registered in Tokyo slumped. Nomura Holdings Inc dropped by 1.1%, Aozora Bank Ltd dropped by 1.6% and Mizuho Financial Group Inc lost 0.8%. Shares of leading exporters also slumped, including that of Renesas Electronic Corp while Sharp Corp lost 2.3% and Mazda Motor Co dropped by 1%.

Hitachi Construction machinery was in counter-trend motion by rising at 1% after Nikkei reported operational profit for April-June period and was predicted to soar up following sales to America which showed positive trend.

Shares of the banking and property sectors also weakened with Industrial Commercial Bank of China Ltd losing 1%, China Merchant Bank slumped by 2.2%, Agile Property holdings Ltd fell by 2% and New World Development Co dripped by 1.4%.

Casino centers and luxuries goods were also part of the downturning trend sich as SpA 4.5%, Wynn Macau Ltd which fell by 2.5% and Galaxy Entertainment Corp which weakened by 2.3%. Meanwhile increase of index in exporter companies made South Korean shares to strengthen, like LG Display Co which jumped up by 3.1% and LG Electronics which rose by 1%.

Shares of Hyundai Motor Co. sunk by 0.2% while KIA Motores Corp inched up by 0.8% after wages dispute triggered their first act laborer’s strike.

In Australia, rally of oil price contributed to increase in energy shares. Oil Search Ltd rose by 1.6% and shares of Woodside Petroleum Ltd rose by 0.9%.

In Sydney stockmarket, Textra Corp. rose by 0.7% after Australia Telecommunication sold their subsidiary company Telstar Clear to Wodafone Zealand at nearly USD 670 million.

In Indonesia, IHSG was continuously under pressure over the sessions in line with the regional market. Previously IHSG had reached the level below 3.975. This was triggered by commodity prices which was visible in the share of the banking sector which sunk deeply. Asian stockmarkets also weakened, being triggered by downturn of commodity price and downturn of employment data in Australia.

The Europe stockmarket during sessions on Friday last weekend (13.7) had higher potentials. This was in line Asian stockmarket after data of China’s GDP came up as estimated. China’s economic growth dropped for the period of April-June to become 7.6%, the lowest level in the past three years, while production of the manufacturing sector dropped to 9.5% in June against 9.6% in May.

Such was a signal to the Government of China to follow up their monetary policy and increase investments, whereby their economic growth would be well maintained over the second semester this year.

At the same time, investors were waiting for the outcome of auction of bonds by the Italian Government. This auction took place after Moody’s Investors Service demoted Italy’s debt rating from A3 to Baa2 as they felt sure that Italy would be infected by the crisis in Greece and Spain. The were undergoing increased return of bonds as their economic prospect was fading out.

Weakening of the global and regional stockmarket was triggred by disappointment over further easing by the US Federal Reserves which eroded confidence all over the place due to “unclear” OE3 which had its negative impact on the global market.

Lack of clarification by the Fed about further easing made most of the index of global shares to weaken last week and to continue this week. Analysts rated that today the Fed was being controlled to maintain status quo and monitor economic progress.

This week there was one factor which had the potential to serve as positive sentiment to the local stockmarket in Indonesia, i.e. decision of the Regional Development Bank of East Java Tbk which posted premiere share at the Indonesia Security Exchange (BEI) as 13th eminent with share code BJTM last Thursday (12/7).

Companies of the banking sector offered 2,8 billion shares to the public with price of premiere share Rp 30 per share and nominal value of Rp 250 per share. Total amount obtained from IPO of premiere share was Rp 1.28 trillion.

Market capitalization was posted at Rp 6,35 trillion. During IPO demand was 3,73 million shares posting 4,411 buyers. The number of shareholders increased to 4,381 through IPO.

The percentage of public shares was 17.87% after offering of premiere shares and ESA and MESOP programs. The average PER industry was 10.86 times and average PBV was 1.83 times on July 11, 2012.

Other positive sentiment came from BI’s step to maintain BI benchmark rate at 5.75% which was rated to have neutral impact on the property shares sector. As known, growth of property was related to interest rate level of banks. With BI rate being settled at 5.75%, it would motivate investors to shift investment to the property sector. Moreover portfolio investment was now in high volatility so as a whole, growth of the property sector would still be prospective till end of 2012.

By BEI data, by year-to-date index of shares of the property sector was the sectored index which rose highest compared to other sectors, posting an increase of 21.33% to the level of 278.16 points. This was the positive sentiment which was predictably supportive to IGHG movement this week in the range of 3,990 – 4,075 with the tendency of limited strengthening.  

Business News - July 20, 2012

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