About which factor was more influential to the stockmarket the Jokowi factor or Janet Yellen factor was still a question, but no doubt they would be the influential factors on IHSG course over the week.
Last week, Rupiah and IHSG were moving in parallel, strengthening till end of last week [4/4] when it stagnated. This week, by considering national holiday on Wednesday [2/4] due to General Election, most probably trade volume would contract with effect on Rupiah and IHSG which tend to consolidate.
Rupiah was transacted in interbank transaction in Jakarta on Thursday afternoon [3/4] strengthening by two points to become Rp11,293 against the previous Rp11,295 per USD. Rupiah was stabilizing as foreign investors still enter the domestic moneymarket.
Entry of foreign capital jacked up demand for Rupiah so Rupiah was still appreciated although still at limited level in line data expectation of US economy which was still positive. The USD was still in the process of strengthening due to positive economic data.
Players of the moneymarket were monitoring data of the Automatic Data Processing [ADP] which released employment data and orders of America's factory which signaled economic betterment. A condition as such could strengthen USD appeal and might edge Rupiah. Fortunately Rupiah was still buoyed by optimism about election this year that it would meet market's expectation. Investors were enthusiastically looking forward to the outcome of Legislative election.
During initial session last weekend [4/4] Rupiah at inter-bank transaction in Jakarta was still slow moving around Rp11,296 per USD. It was expected that Rupiah would strengthen in the range of Rp11,250 - Rp11,275 per USD at closing session. Meanwhile Rupiah mid-rate was set to stagnate. BI's data had it that Rupiah mid rate was set Rp11,310 per USD the same as on Thursday [3/4] at Rp11,303 per USD.
According to Bloomberg Dollar Index, Rupiah inched up by 0.1% to the level of Rp11.312 per USD. Presumably due to increase of foreign capital inflow in portofolio in one month to Indonesia's moneymarket. By such additional capital inflow, the total foreign capital inflow through January-March was USD 5.7 billion.
Previously BI noted total foreign capital entering Indonesia in the first 2 months of this year at USD 3 billion, broken down as follows : USD 1.9 billion in State Promissory Notes [SBN] USD 0.8 billion and USD 0.3 billion at Bank Indonesia certificate. Last March in particular, foreign capital that entered the stockmarket was USD 1.2 billion, in SBN USD 1.4 billion and the rest in SBI.
Last Thursday 13/4] USD slapped inches of muscles to its strength in the past 2 months to overpower Yen. The position of USD never posted any change at 103.89 Yen per USD. In the previous transaction, USD touched the level of 104.07 which was the mightiest state since January 23 last. Meanwhile against Euro USD had not changed much at USD 1,3770 per Euro The position of Euro against Yen was 143.04 Yen.
Today marketplayers were optimistic against data of nonfarm payrolls scheduled to be released last weekend [4/4]. The trend of USD strengthening against Yen would continue provided the data released were sound. For information, the US Department of Labor would release data of employment of 200,000 workers in March.
Only trouble was that the process of USD strengthening would be held back by statement of the Fed's Governor Janet Yellen who planned to maintain low bank interest. Yellen stated that America's domestic economy needed this kind of policy to strengthen the labor market. Economic growth looked stable but there was no denying that the labor market had not returned to its normal state.
To most Americans, economic recovery was still felt as recession and the condition was also reflected in some economic statistic figures.
Yellen's statement was to underscore the Fed's determination to maintain low bank interest, to keep America's economy strong. About 2 weeks ago, Yellen's remark made after the Fed's policy meeting about increased bank interest had triggered market turbulence. At that time some investors interpreted Yellen's remark as signal the increase of bank interest could be sooner than predicted.
Last March some of the Fed's high officials signaled that next year there would be short term bank interest, from is near zero percentage to around 1%. Some investors estimated the bank interest would be in effect by mid to end of 2015.
Yelled stressed that easing of bond buying program with the aim to maintain low bank interest for enhancing growth could not be rated as uprooting of economic supporting factors. On the contrary the Fed kept strengthening support in spite of slower pace.
In March last the Fed decided to ease bond buying program to the amount of USD 10 billion to USD 55 billion. Predictably the Fed would keep axing buying of bonds this year, which would end by Autumn. Hence this week would be in the range of Rpl 2,000.- Rp12,300 per USD with tendency to consolidate.
The Capital Market
Index of IHSG at the Indonesia Security Exchange [BEI] last Friday 14/41 was opened to increase by 3.02 points or 0.06% to become 4,894.34. Index of La 45 inched up by 0.78 points to the level of 829.55. Foreign investors were doing net buy of Rp108.78 billion. Trade volume came to 2.07 billion of shares worth Rp1.2 trillion. 68 shares strengthened, 130 shares weakened and 85 shares stagnated.
Meanwhile US stockmarket ended up negative during transaction last Friday 14/41. Strengthening of stockmarket had to stop after increasing in 4 consecutive days. Index of DJIA inched down by 0.45 point to the level of 16,572.55. In the last 4 days index of DJIA
On the contrary Asian stockmarket was still stationary. Index of Nikkei inched up by 0.1 %, index of Hang Seng inched down by 0.03%; index of Shanghai inched up by 0.3% an index of Kospi inched down by 0.1 %. The reason was because investors were doubtful about data of US nonfarm payrolls. The data had the potential increase of 197,000 from February which opened 175,000 new jobs. Summer in the USA triggered high demand for labor. This would push workforce to 275,000 for March, which was the highest increase in the past 13 months.
Sentiment from increased jobless claim from 16,000 to 326,000 [higher than the consencus of 317,000 ]. There after there was widening US Trade Deficit unexpectedly at 7.7% to become USD 42.3 billion. The figure was by far higher than the consensus of economist of USD 38.5 billion, the lowest level in the past 5 months so there was a potential of US GDP growing less than the previous projection.
Index of Nikkei was crawling up to positive area. Such was additional advantage after two day rally toward highest level in the past three weeks. Meanwhile China's stockmarket was trying to stay away from negative zone. The People's Bank of China had given positive sentiment by making intervention on the moneymarket to make it move naturally.
For sure IHSG would be tested of its strength during last week-end's transaction [4/4] in the range of 4,850 - 4,900 with tendency to slightly strengthen. As known the pressure to make profit mounted amidst same sentiment at the global stockmarket. It was advisable to make selective buying of shares which promised sizable dividend and to focus attention on the banking sector, basic industry, infra structure and consumer sector. Some sectoral shares needed attention in regard to new released regulations.
The Ministry of Energy and Mineral Resources [ESDM] stated they had prepared two scenarios of restriction of national coal production. As planned, this policy would be specified in Ministrial Regulation and to be put in effect by 2015 next. The first scenario would be the Government would permit national coal production to be increased by 1% per year based on Domestic Market Obligation [DMO] and lowering export volume at the same time.
The second scenario was coal production was not permitted to increase against previous year, while the DMO obligation continued to increase year after year. To make the policy run well, the Ministry of ESDM had coordinated with the Provincial Governments. Understandable because the Central Government only had the authority in determining production volume for concession holder companies in coal exploration [PKP2B] as published in the respective workplan [RKAB] of companies per year.
As with RKAB for mining permit [IUP1 it was the authority of each provincial Government. The Government had conducted meeting with the local authorities of Palembang, and Balikpapan. The meeting outcome boiled down to two scenarios to be analyzed by the Ministry of ESDM to regulate restriction of coal production. Having coordinated with the provincial Government, the next step for the Government was to ask for input from businesspeople to set up a scenario to be chosen in restricting coal production.
At the last stage, policy would be formulated in the Ministry of ESDM regulation to be released this very year. The Government would also specify the DMO policy to prohibit transfer of quota for companies.
In particular investors were advised to collect shares of the banking sector. The discourse about maintaining benchmark rate was believed to make global investors continue doing net buy of the reputably liquid shares. Marketplayers were also advised to avoid shares of the plantation sector for the short term.
However, the ever increasing price of share still had the chance to stimulate profit taking. In this case shares of the consumption and trading sector were subject to technical correction. Marketplayer's estimate of the two types of shares was still too high. correction on shares of the plantation sector was more prevalent as global prices of palm commodity prices went down.
Meanwhile shares of the telecommunication sector tend to invigorate in the medium and long term. Low internet market penetration in Indonesia opened growth opportunity to the telecommunication industry, but to grab the opportunity operators must invest significantly in broad networking way before seeing the fruits of effort.
With industrial built up going on, price competition cooled down in data services like Short Message Service [SMSI and voice. Offers of new services which was innovative would serve as the main propeller force to capture opportunities in data while maintaining income from sms services and voice.
Considering the execution of Legislative Election on April 9, 2014 which ran peacefully and orderly and Wednesday being declared as national holiday, IHSG was projected to consolidate in the range of 4,875 - 5,000. (SS)
Business New - April 11, 2014