RUPIAH AND IHSG TEND TO STRENGTHEN MODERATELY

The approved APBN State Budget 2014 worth Rp1,800 trillion signaled that Indonesia’s economy would be positive next year in spite of overshadowing global economic slowdown.

The trend of inflation easing to the level of 8.5%-9.0% this year brought positive sentiment to market players. This means strong signal that BI would not increase BI rate again and settle at 78.25%. Furthermore the suspension of fiscal stimulus in the USA to the amount of USD 85 billion brought pressures on USD and positive sentiment on regional stock market including BEI.

So this week there was a chance for Rupiah strengthen, the same was index of IHSG although at moderate level. Well guarded emitents’ performance also injected positive sentiment to the local stock market.

The Money market

Rupiah exchange rate value at inter-bank transaction in Jakarta on Friday morning [25/10] strengthened by 25 points to the level of RP11,100 against initial pre-opening position at Rp11,125 per USD.

Previously, market players positive expectation of Indonesia’s economic performance uplifted Rupiah exchange rate value at inter bank transactions on Thursday [24/10] to strengthen by 315 points to become Rp10,845 against the previous position [23/10] of Rp11,160 per USD.

Domestic sentiments uplifted Rupiah value against USD. The market expected Indonesia’s economic performance to be positive once more. The market projected by October 2013 not to be too high in the range of 0% and Indonesia’s current transaction performance by September 2013 to be surplus once more.

Beside fundamental factor, strengthening of domestic currency was also driven by technical factor as indicated by Rupiah sinking quite deeply the day before. External sentiment was also negative for USD which brought strength to world’s currencies including Rupiah. USD was predicted to weaken in the long run, which was related to the US economic condition which was still unstable, and the condition of Government shutdown.

Chances of the Fed not to reduce stimulus in 2013 brought positive sentiment on Rupiah. Besides increased activity of the manufacturing sector in China also brought expectations for better Indonesia-China trade balance considering China was one of Indonesia’s main trading partners.

Rupiah exchange rate value in 2014 was expected to be maintained at around Rp10,500-Rp10,700 per USD. Agus Martowardojo Governor of BI predicted rupiah value in 2014 to be in the range of Rp10,500-Rp10,700 per USD. The target was based on performance of Indonesia’s economy growth which would be better at 5.8%-6.2%.

However, it should be borne in mind that Rupiah movement was still sensitive to world’s economy development. As with controlling inflation and  monetary system of 2014, BI set up a strategy aimed at seven targets.

The targets were among others [1] to affirm the transition process of bank controlling to the Financial Service Authority OJK, [2] to strengthen the framework and monetary mix [3] to maintain currency exchange rate policy [4] to make in-depth probing on forex and Rupiah market, [5] to enhance macro prudential financial system, [6] to strengthen BI synergy with related financial institutions, and [7] to safeguard national networking and availability of distributable banknotes.

With ascertained Indonesia’s economic prospect next year which would be better, it would serve as push up for Rupiah to continue strengthening toward the targeted level. In the least position last week [25/10] Rupiah value was predicted to be in the range of Rp11,100-Rp11,300 per USD with tendency to strengthen moderately.

The Capital Market

Unlike the opening session of last week [25/10] IHSG started with weakening by 16 points having passed fluctuative moments since opening session. Indices fell following regional stock markets.

Opening transaction, IHSG weakened by 15.481 points [0.34%] to the level of 4,579.364 being under pressure to sell. The high index level of last week was benefited by investors to make profit. Index moved in narrow range and once landed on the green zone although only for a moment at the high 4,604.207.

During closing of session 1 on Friday [25/10], IHSG weakened by 16.880 point [0.37] to the level of 4.577.965. Meanwhile index of LQ45 inched down by 4.264 points [0.55%] to the level of 770.401. Seven out of ten sectoral index fell into the red zone, led by the infra-structure sector. three sectors were still strengthening, namely: construction, finance and trading.

On that day trading ran moderately with frequency of 100,429 transactions consisting of 2.254 billion shares worth Rp2.845 trillion. 91 shares rose, the remaining  102 shares dropped, and 114 shares stagnant.

Meanwhile regional shares were falling to the red zone. Act of selling prevailed although markets players had positive sentiment from the global market the night before. Index of composite Shanghai inched down by 20.82 points [0.96%] to the level of 2,143.50. Index of Hang Seng weakened by 121.89 points [0.53%] to the level of 22,713.93. Index of Nikkei 225 slumped by 288.90 points [1.99%] to the level of 14,197.51. Index of Straits Times was reduced by 4.93 points [0.15%] to the level of 3.213.02.

Previously IHSG was axed by 15 points being under pressure of selling. The position of index on the day before which already soared high was benefited by investors to make profit. All in all, index was still moving within narrow range. Market players were not aggressive in taking action as they watched development at the regional market.

In New York stock market Wall street shares again strengthened following expectations of continued stimulus by the Fed upon seeing the existing economic data, also emitents’ performance which was the driving force of America’s stock market. Property shares rose notably such as: Pulte Group Inc, D.R.Honton Inc. and Beazer Homes. New employment data of USA only inched up and slipped off from market prediction.

The slow growing employment data was expected to motivate the Fed to continue their stimulus program till end of this year. The market saw there was liquidity up jump which supported price of shares to go up, and heartening development of financial reporting trends.

During closing session on Thursday [24/10], index of Dow Jones rose by 95.88 points to the level of 15,509.21. Index of Standard & Poor’s 500 strengthened by 5.69 points [0.33%] to the level of 1,752.07. Index of Composite Nasdaq increased by 21.89 points [0.56%] to the level of 3,928.96. Index of Wall street increased as there was hope the Fed would continue stimulus after seeing US economic data. In addition to that emitent’s performance was also the driving force of stock market strengthening in the USA.

Strengthening of index was also thanks to positive sentiment of emitent’s good financial report as well as data of factory production in China which showed expansion in 3 consecutive months touching the highest level in 7 months. Jobless Claim report released last night showed downturn of 120,000 to the level of 350,000 and US trade deficit which slightly bettered by 0,4% to become USD 38.8 billion.

The chance for BEI index to strengthen last week was still open in the range of 4,5755-4,600 by support of foreign investors who were still doing net buy of shares in sizable amount. This act of buying was response to release of Moody’s rating agency who rated that Indonesia’s economic prospect was still stable.

Indonesia’s debt level was still at Baa3 supported by economic prospect which was healthy, contracting fiscal deficit and Government’s debt ratio which lessened, all serving as catalyst of index strengthening. Technically, index had the potential to continue strengthening but investors were warned to watch on the chances of sudden backflow due to act of profit taking.

Over the week IHSG was predicted to move in the range of 4,525-4,625 supported by emitent’s financial report per quarter 3 which was notably in good condition. Emitents of the banking sector was predicted to be stock market up lifter because of the good work compared to emitents of others sectors. Shares of the banking sector would take the lead in strengthening while other sectors which rose high was mix industry, basic industry and construction.

It was noteworthy that one by one national banks released their performance report through quarter III-2013. The outcome was positive although banks were worried about continual BI rate increase which stagnated credit extention and performance. An example was Bank Victoria International which booked profit of ongoing year at Rp218 billion by end of September last. This figure was 61.5% higher compared to same period last year.

Bank OCBC NISP was also securing rights issue of Rp3,5 trillion, which was expected to be accomplished this year. This fund was to hold back bank’s expansion move. By end of quarter III last, OCBC NISP booked profit increase of 28% to become Rp838 billion. The credit pipelined came to Rp16.19 trillion, growing by 21% y,o.y. The breakdown credit for working capital 42%, investment 37% and consumer 21%.

Meanwhile National Pension Saving Bank [BPTN] was preparing funding from IFC loan and Sumitomo Mitsui Banking Corporation. This bank which pipelined 68% of their portofolio credit to pensioners developed business among others by branchless banking. The second biggest credit was pipelined to micro business, the portion constituting 22%.

Company banks naturally made impressive performance, propelled by Bank Rakyat Indonesia with net profit of around Rp15 trillion and Bank Negara Indonesia at around Rp6 trillion. Almost certainly shares of the banking sector would be sought after by investors as they were posting good profit and stable amidst various BI’s strict regulations.

Business News - October 30, 2013