Bank Indonesia's decision last week [8/5] to maintain BI benchmark rate at 7.5% was responded well by marketplayers as it was already in line with market expectation. BI' announcement that revised economic growth this year would be around 5.3% - 5.5% was well accepted by the market as it was rational and objective.
Now investors were also watching the Fed's maneuvers under Janet Yellen which signaled to continue moderately tight monetary policy. There seemed no fundamental change in US economy and therefore promised better certainty in spite of overshadowing Ukraina factor.
At home, toward announcement of electory outcome and Presidential candidating by political parties there was expectation for positive sentiment for Rupiah and IHSG.
Rupiah value against USD strengthened during transaction on Thursday [8/5]. Data of Bloomberg Dollar Index had it that Rupiah inched up by 0.13% to Rp.11,563 per USD. All day Rupiah moved in the range of Rp.11,563 – Rp.11,634 per USD. During early session, Rupiah was open to inch up by Rp.11,575 per USD against previous closing at Rp.11,578 per USD.
Somehow Rupiah on Friday [9/5] weakened by 8 points to become Rp.11,570 against previous position at Rp.11,562 per USD. In general Rupiah was transacted the varied way against USD on Friday morning [9/5] last. Of 11 Asian currencies, 5 strengthened against USD, the strongest being Peso. The other five currencies, Rupiah being supressed most by 0.13% to Rp.11,577 per USD.
Predictably BI's mid-rate against USD last weekend [9/5] was in the range of Rp.11,550 –Rp.11,600. Rupiah's course was in paralel with IHSG which was also descending. Meaning Rupiah was still in the red zone; even BI's fixed rate was not strong enough to uplift Rupiah. Normally Rupiah tend to weaken especially when marketplayers saw no change in bank interest which means no stimulant for Rupiah.
Incidentally this time Rupiah downturn was in parrallel with Yuan which would bring impact on trade balance. Moreover with the political crisis in Thailand which might depreciate Baht. The Constitutional Court of Thailand's verdict on Prime Minister Yingluck Shinawarta seemed no ideal wayout of the crisis.
The Court's verdict had led Thailand to a horizontal conflict spit the nation into two blocks. The Court's decision was like a two sided blade which were equally injurious.
The Court's verdict to oust PM Yingluck, accusing him of power abuse resulted in heightened conflict fueled by disappointment among Yingluclk's supporters, on the other hand the verdict to free him disappointed the opposition front.
Although legal solution was necessary, the outburst that happened after verdict of the legal constitution was given clearly proved that Thailand was in need of a political solution instead of just legal way-out. Apparently the political elite of Thailand were too late to realize that the unrest had flared up to burn all the elements of life in Thailand.
The head-on confrontation between the two fronts in Thailand needed an approach which could melt down political grudge after Thaknsin Shinawarta was ousted by military coup d'etat. Effort of the opposition to bring the case into the domain of law was regarded by pro-Yingluck group as legalized ousting.
Somehow the complicated situation in Thailand still needed legal solution. The only thing was that solution was incomplete without political solution and power disassembling. The Constitutional Court had to face a crucial dilemma because whatever the decision, Thailand remained to be in a vacuum condition.
The vacuum condition in Thailand's politics needed The Third Way to refer to Prof. Anthony Giddens, expert in social democracy. Thailand even needed three ways, i.e. the legal way, politics and meta politics toward one point of power deconstruction. It was time to fully elaborate Thailand's social asset which was supported by royal charisma to end political vacuum.
Last week [8/5] BI decided to keep benchmark rate at 7.5%. The monetary authority also maintained lending rate and deposit facility at 7.5% and 5.7% respectively.
The decision was based on the development of global economic condition, especially deficit in current transaction and inflation. To policy was still to keep inflation on the track, i.e. 4.5% +1- 1% and 4% +1-1% in 2015. Inflation was seen to be on the downturn. . Inflation in quarter I /2014 was 7,32% don against previous quarter at 8.38%. Eased inflation was due to eased inflation in volatile food and core inflation.
Maintained BI rate was also expected to narrow deficit to the targeted 3% of GDP this year. Deficit in quarter I was posted at 2.06%, down against quarter IV at 2.12% due to contraction of non oil-gas import and moderation of economic process; also reduced deficit of service balance sheet.
BI had also revised down economic growth this year from around 5.5% -5.9% to 5.1% - to 5.1% -5.5% taking into consideration realization of economic growth and estimation on the external side, commodity prices, and effect of the Minerba Law. Revision was necessary because of downturn in real export, namely goods and services.
When BI estimated economic growth would be at 5.5% - 5.9%, export of goods and services was predicted to grow by 8.1% - 8.5%. However, in view of the present condition, export of goods and services was only projected to grow at 1.5% - 1.9%. On the other hand BI estimated Household Consumption could grow by 5.1% - 5.5%, higher than the previous estimate at 4.9% - 5.3%. investment could still grow at around 4.8% - 5.2%.
There were at least 3 basic factors used as reference by BI among others economic slowdown in China, downturn of commodity prices and the Minerba Law. To cover up economic slowdown, BI claimed that the Household consumption sector and investment could grow to sustain economic growth of quarter I / 2014.
The only thing was that BI was beginning to watch on increasing import of consumer goods toward Ramadhan fasting month and Idul Fitri. The reason was that increased import would expand deficit. Usually toward Ramadhan import tend to increase, especially oil-gas and non oil-gas.
The same condition happened in the years before. DTB would also be affected by repatriation, in addition to some global risk which affected current transaction. Apparently Rupiah would be stationary at around Rp.11,550 – Rp.11,650 per USD and to strengthen again this week at Rp.11 ,450 – Rp.11,600 per USD still strengthened by election factor.
The Capital Market
Last Thursday [8/5] index oh IHSG closed transaction to inch down by 1.180 points [0.02%] to the level of 4,860.860.889. Meanwhile index of LQ45 inched up by 1.480 points to the level of 821.565. Index was only able to reach its highest level at 4.889.052 before finally slipping off to the red zone.
There were acts of profit taking during announcement of BI benchmark rate. BI finally decided to maintain benchmark rate at 7,.5%. This was rated as in line with inflation expectation. The stable condition made marketplayers hunt shares to push IHSG back to positive direction although only momentary. Foreign investors were among the most active in releasing shares, they were seen to make foreign net sell worth Rp.136 billion all over the market.
Janet Yellen's speech once brought positive sentiment to regional marketplayers. US stockmarket was also zealous as indicated by index of Dow Jones which once rose by 104 points or 0.2% to 16,580.84 as the highest record since April 30. Shares of AT & T and Walt Disney took the lead in increase of premium shares. However index of S&P inched down on 0.2% while index of Nasdaq also inched down by 0.4% being suppressed by shares of the energy and utility sector.
Index of Nasdaq had fallen to its lowest level for 3 consecutive days since last month. Early last week Nasdaq strengthened thanks to technologic! shares and reduced joblessness, but act of selling of energy and utility shares which ascended early last week, dragged the two reference indices to the negative territory.
This week New York stockmarket was predicted to stay good because labor toward announcement of joblessness claim dropped by 26,000 to become 319,000 last week against 325,000 the week before. For 4 weeks increasing by 324,750 against 320,250 the previous week. This was related to the statement that the employment market had fully recovered after winter. Marketplayers could see US economy growing fast.
Asian stockmarkets closed transaction compactly at green zone. Index of Nikkei 225 went up by 130.33 points [0.93%] to 14,163.78 and index of Hang Seng rose by 90.86 points [0.42%] to the level of 21,837.12 - while index of Composite Shanghai strengthened by 5.19 points [0.26%] to the level of 2,015.27 and index of Straits Times grew by 7.91 points [0.24%] to 3,244.34.
During early session last Friday [9/5/2014] at BEI IHSG progressed by 117 points [0.24%] to 4,872 the lowest level being 4,865.2 and highest 4,878.703; 122 shares posted upturn, 52 shares down, 70 shares stagnated and 297 shares totally inactive. Total transaction value had not reached Rp.1 trillion at Rp596.4 billion. Foreign investors booked buyings worth Rp.151.1 billion and sales Rp.98.8 billion. All in all, foreigners booked net buying worth Rp.52.2 billion.
So far BEI already booked foreign capital entering Indonesia at Rp.30 trillion since early 2014. The so many foreign capital flowing in showed that Indonesia's stockmartket was growing. Foreign net buy early this year till last week had reached Rp.30 trillion.
Today IHSG was second highest in ASEAN next to the Philippines. Increase by year-to-date was posted at 14%. Market capitalization also increased constantly. Indonesia's stockmarket was today developing. To maintain it, various measures had been taken such as running Investors Day 2014.
As per this week, investors must observe shares of the banking sector. As known, credit growth as per quarter I 2014 slowed down against previous quarter in line with domestic change. Credit growth to the economic sector slowed down from 21.4% in quarter IV 2013 to 19.1% in quarter I 2014. BI kept coordinating with OJK to balanced up economic growth.
Previously OJK already underscored they would give notice to banks having credit growth above 20%. BI and OJK feared that if banks were too aggressive in extending credit it affected liquidity. Banks were asked to be more prudent in responding to macro economic condition.
From the above picture, last week predictably IHSG would be closed in the range of 4,890 - 4,940 and to continue this week in the range of 4,900 5,000 as investors were satisfied with the announcement of election outcome. (SS)
Business New - May 14, 2014