RUPIAH AND IHSG STILL CONSOLIDATING

Introduction

               

To review the development of Rupiah value and IHSG stockmarket over the past week which seemed notably fluctuative, it was predictable  that the flatform of movement would progress toward consolidation this week. However if there was any good news at all, it would mean opportunity for Rupiah and IHSG to consolidate.

The Moneymarket

               

As noted, Rupiah exchange rate value against USD at the inter-bank forex spot market Jakarta on Thursday [14/3] was closed to inch down by 5 points [05.05%] to Rp9,700 – Rp9,705. This was predicted to still continue till Friday last week end [15/3] toward consolidation. As known marketplayers were still waiting for the outcome of Uni Europe Summit while anticipating outcome of the Federal Open Market Committee [FOMC] of the Fed.

The potential of Rupiah consolidation with tendency to weaken last week end was among others triggered by the outcome of Uni Europe Summit which had been underway since last weekend. The market needed to see whether there was any decision at all about bailout for Cyprus.

Besides, the market also needed to see how the Uni Europe reacted to the political situation in Italy. There fore Rupiah had the chance to consolidate with the tendency to weaken in the range of Rp9,690 to Rp9,715 per USD last week end [15/3]. The point was that the market was waiting for further development in Uni Europe Summit.

Most probably there would be no significant outcome considering that bailout for Cyprus in the Summit agenda would only be discussed by the financial ministers of the Euro Zone during meeting intervals.

Meanwhile range of US data which was already predicted still tend to be varied. Supposedly the condition slightly eased market worries over faster withdrawal of US stimulus. US inflation, by producer’s price index was predicted to increase from 0.2% to 0.7%; but US unemployment claim was predicted to worsen from 340 thousand to 348 thousand. The same was with US balance of payment; it was predicted to worsen from minus USD 108 billion to 111 billion.

The US data was quite varied but was not good enough to downpress USD further; because in Wednesday and Thursday this week the market already had to face the FOMC meeting. The market was reluctant to weaken USD toward the Fed’s monetary agenda.

Broadly speaking Rupiah exchange rate value tend to be stable amidst respose of marketplayers to downturn of Europe’s production output and good news of auction result of Spanish bonds which exceeded target of 5.5 billion Euro to become Euro 5.83 billion.

It was noteworthy that USD exchange rate value once dropped after touching its strongest level against Euro since December 2012 as European leaders were debating about how to ease national budget burden amidst debt crisis in the region. USD was posted to slump by 0.3% to the level of USD 1,3005 per Euro in New York after touching the strongest level since December 10,2012.

Yen was posted to strengthen against USD after weakening since August 2009 as the House of Common of Parliament supported Haruhiko Kuroda, a recommender of stimulus, as the next Governor of the Central Bank.

Greenbuck slightly changed at 96.11 per Yen after being depreciated to 96.71 on May 12 last, the lowest level since August 2009. Meanwhile Yen was posted to weaken by 0.3% to become 124.99 per Euro.

Meanwhile Australian Dollar rose to its highest level in nearly 13 years. Furthermore Poundsterling also rose after touching lowest level since 2010.

At home, Rupiah movement was reckoned to be influence by Rupiah Stabilization policy exercised by Bank Indonesia. Besides, stability of Rupiah exchange rate value was supported by inflow of foreign capital to Indonesia. Moreover the anxiety over tightened forex was not proven by reality. Evidently banks were still aggressively making investment on Forex Term Deposit to Deposit part of their third party fund.

Based on data of Bank Indonesia of January 2013, DPK of bank’s forex came to Rp484.86 trillion whilst forex credit credit came to Rp429.71 trillion. Meanwhile banks had excess of liquidity of Rp55.15 trillion. It was this excess of liquidity which was parked at Forex Term Deposit.

Last January bank’s Forex TD came to USD 1.38 billion. The composition was one week USD 884 billion, two weeks USD 435 million and one month USD 60 million. This mid of march total forex TD again increased to USD 1.53 billion. Forex liquidity was still safe if banks continued to increase forex DPK in line with demand for forex  credit but banks must remain to be cautious and anticipate growing demand.

Forex Term Deposit had room for liquidity in which to place their liquidity excess. Although they had placed fund at forex TD, bank’s liquidity was still high. More of forex fund were placed in Nostro account than Forex TD. The reason was that Nostro interest was more appealing and could help banks who needed short term fund by releasing to the market at better price. Nostro was most used for bank transaction activities such as import-export financing.

Fear of tight forex liquidity was not groundless. In the past 2 years Loan-to-Deposit Ratio of forex was notably high. The highest LDR ratio happened at end of 2011, posted at 93.45%. In 2012, banks LDR was slightly down to become 91.27%. Ideally banks LDR was in the range of 85% - 90%.

Good news came from the Central Bank, where BI continued to exercise policy mix of monetary policy and macro prudential policy in maintaining Rupiah stability whereby to support the financial system, such would help BI in playing their strategic role to safeguard national economy toward macro stability and economic sustainability.

Besides, BI would foster coordination with the Central Government and the regional Government and Financial Service Authority [OJK] to strengthen national economic resilience. The implementation of a monetary policy should not only be based on bank interest as instrument, because various economic problems including stability of Rupiah value was not only caused by monetary factor. Moreover with the condition of the financial sector in Indonesia, the impact of monetary policy could be felt in bank interest, exchange rate value, money in circulation and price of asset.

Monetary policy which was only based on bank interest was very unlikely to be effective considering the high expense needed for troubleshooting economic problems like inflation, credit, and deficit in balance of payment. The monetary expenses to be spent by BI would be just as high.

In additional to the above, other points to be considered were expectations of economic players and autonomy policy for the regions and inter-regional development. There were at least five policy instruments to be applied, i.e. to direct BI rate so inflation would be under control, to maintain stability of Rupiah value to be synchronous with the fundamental economic condition, to control inflow of foreign capital especially of the short term and qualitative type, to control liquidity and credit to be in parallel with macro-economic projections; coordination with the Government [central and Local] and strengthening policy communication.

Other good news which orchestrated Rupiah this week was statement of President Susilo Bambang Yudhoyono that the Government would not increase price of subsidized oil and decided to take another option although oil subsidy was admittedly a heavy burden to APBN budget.

Other option beside increasing price were necessary to maintain fiscal continuity and grab the momentum of economic growth. The point was that increased price of subsidized oil had its implication on price stability, inflation, and other economic problems. Some options would be taken by the Government in the next two weeks before recommendation was set forth by the National Economic Committee [KEN]. From the above picture it was clear that, although Rupiah seemed to be consolidating, there was room fro Rupiah to move in the range of Rp9,675 – Rp9,700 per USD through this week. The Capital Market.

In tandem with Rupiah which moved down ward, so did IHSG which also descended at the Indonesia Security Exchange [BEI] which sank by 49 point s was subject to profit taking because the position was still high while there were was no positive sentiment. During closing session last Thursday [14/3] IHSG slumped by 49.072 points [0.01%] to the level of 4,786.367. Meanwhile index of LQ45 dropped by 11.156 points [1.35%] to the level of 816.592.

Technically, downturn of IHSG was part of consolidation. The course of IHSG was predictable by the technical indicator which signaled weakening. Most probably IHSG BEI would move in the range of 4,775 – 4,800 by end of closing session last week [15/3]. This was signaled since the morning session where most of Asian stockmarkets including BEI was end toward election of the Governor of BoJ which should have been held last weekend. Lack of new positive sentiments from the domestic side would make index of BEI prone to acts of profit taking which disadvantaged IHSG.

Previously, shares at the Wall Street stockmarket was moving positively. Index of S&P 500 broke its new record  following index of Dow Jones Industrial Average which never stopped making records in 8 consecutive days. During closing session last Thursday [14/3] index of S&P rose by 8.71 points [0.56%] to the level of 1,563.23. This was the highest level of S&P 500 index after October 2007 which was posted at 1,565.15.

Index of Dow Jones Industrial Average was also making record, ending with increase of 83,86 points [0.58%] to the level of 14,539.14 which was a consecutive increase since 1996. Meanwhile index of Nasdaq rose by 13.81 points [0.43%] to the level of 3,258.93. Meanwhile Asian stockmarkets during early session last week moved the variable way.

Hence until the tenth day till week end last week [15/3] the stockmarket in the USA was still continuing consolidation, this time unemployment data was the sustainer factor. From economic data, US unemployment claim dropped to 10,000 against the previous 3321,000 This indicated downturn consecutively through the third week.

This condition might turn out to be the highest bullish since the 1980’s. The Fed pumped US 85 billion per month to the market so there was no more way to go down. But nobody knew when such would happen.

Strengthening of Dow Jones index had support from HP and IBM shares. These premium shares had risen by 10% and was ready to make best performance for the first quarter since 1998. Historically strengthening in the first Quarter showed high increase all year through. Since 1950 there were only 12 cases as Dow Jones increased more than 10% in the first quarter to be supporter of strengthening in that very same year.

Meanwhile index of Nikkei 225 rose by 112.23 points [0.91%] to the level of 12,493 as index of KOPSI inched down by 0.52 points [0.03%] to the level of 2,001,61. Index of Nikkei bounched back on their feet as Yen was exchanged at the lowest level in the last 3.5 years against USD. Last report from the USA signaled that economy was gaining strength in a continuing process of recovery.

Previously the regional stockmarket, among them index of Hang Seng weakened by 178.56 points [0.79%] to the level of 222,378.09 and index of Straits Times clumped by 7.57 points [0.23%] to the position of 3,280.95.

At the domestic stockmarket, investors were advised to observe the banking sector, as eight big banks were showing better efficiency in 2012. The uplift was indicated by downturn of ration of operational burden on operational income [BOPO] of cost of income ratio [CIR] of the eight banks 127 basic point on the average.

The eight banks were PT Bank Mandiri Tbk [BMRI], PT Bank Rakyat Indonesia Tbk [BBRI], PT BNI Tbk [BBNI], PT Bank CIMB Niaga Tbk [BNGA], PT Bank Danamon Indonesia Tbk [BDMN] and PT Bank International Indonesia Tbk [BNI] PT Bank Tabungan Negara [BBTN] and PT Bank OCBC NISP Tbk [NISP].

It was understandable why shares of the banking sector turned out to be the prima dona today, as national banks were the magnet that drew many suitors, local or foreign. It was projected that this year there would be many acts of acquisition of banks by local or foreign investor. Apparently the bright prospect and promise of high profit had attracted foreign banks to engage local banks.

From the above picture it was clear that, in spite of Rupiah consolidating, there was room for IHSG in BEI to move up in the range of 4,775 – 4,815. Publishing report of emitents which mostly reported good performance served as catalyst of index strengthening besides publication of profit raking through distribution of dividends.(SS)

Business News - March 20,2013