Tuesday, 19 August 2014


Final outcome of the Presidential election announced by the Electoral Commission [KPU] on July 22, 2014 could breese out hope to the domestic moneymarket. The emergence of Joko Widodo – Jusuf Kalla as President and Vice President for 2014 – 2019 period might promise good future.

Clarification of the electoral outcome would at least lead to certainty of political course in Indonesia. This was assuming that protest of the Prabowo Subianto – Hatta Rajasa losing candidates who planned to bring the case to the Constitutional Court by July 25 2014 at the latest was ignored. Whatever steps taken by losing team political or legal market players were sure the election process had run will.

So the market confusion that happened last Tuesday afternoon would nor last long. The market was still certain that the Jokowi-JK would lead the nation well till the end of their office. What was now being the market’s concern was the outlook of the cabinet, especially in case of the ministers of economy, finance, industry, BUIM, agriculture, and trading.

If all marketplayers’ expectations were accommodated by the Jokowi-JK team, Rupiah stand a change to be appreciated to the level of Rp11,000.- Rp11,400.- per USD till end of year, while IHSG index at BRI might move up to 5,500 till end of year.

The Moneymarket At the spotmarket last Thursday [24/7] Rupiah weakened by 0.17% to Rp11,528 per USD. Previously on Wednesday [23/7] Rupiah strengthen by 0.85 points to become Rp11,507 per USD. The euphoria of electoral outcome managed to uplift Rupiah position amidst up going of USD index.

Data of increasing mortgage sales in the USA contributed to further strengthening of USD index. Inflation rate which resisted at above 2% annually plus tension in Ukraina which was far from over contributed to strengthening of USD. Meanwhile Euro sank to 1.34 per USD in tandem with Yield US Treasury of 10 years tenure fell to 2.46%

Euphoria over electoral outcome would lead Rupiah to strengthen notably through the coming weeks. Positive sentiment which prevailed to end of year still considered national macro-economy especially development of deficit in current transaction and inflation. After the election Rupiah tend to better in the range of Rp11,800 per USD moving toward Rp11,500 per USD.

With support of favorable political-economical condition, Rupiah was believed to stabilized at around Rp11,500 – Rp11,600 per USD and it means a good star for post Lebaran week on August 4, 2014 next at around Rp11,450 – Rp11,550.- per USD. Assuming to ignore the global discourse of using China’s Renmimbi as international currency.

It was only very reasonable to use Renmimbi as global currency, but a process of evolvement would be necessary for such. Now China was beginning to expose their currency to the world, were now beginning to be used as medium of payment. When Yuan was one of the leading currencies of the world, the impact would be positive because economic players would not rely of one single currency and risk would be minimized.

However, it might take around 10 to 20 years before Yuan could be used as International currency. The role would gradually increase by percentage. Analysts also rated that the potential of Yuan edging aside the role of USD was high, considering China’s great trading volume.

However Yuan was not ready enough to replace USD for the short run, considering the so many homework to be done. For example, the forex reserve management system in China was still controlled by the local financial authorities while money liquidity was still low in the market.

Although China’s fundamental economy was strong, inflation was also high, even above that of the average developed countries. High inflation would automatically affect currency value, which means higher risk of weakening. So what China had to observe was inflation level, before their currency could be used by the global market. At the moment China was still concentrating on trading and supposedly from the fundamental economy there should be portion for investment so the economy could be sustainable.

For information, HSBC survey concluded that in the future Yuan stands a chance to prevail in world’s economy and edge USD aside. The survey unveiled there were 11 countries like France and Taiwan where companies quite their transactions in Yuan.

Survey was made on 1,304 companies of 11 countries having business relations with China, namely China, Hong Kong, Australia, England, Germany, France, Uni Arab Emirates, Canada, and USA.

It was noteworthy how BI predicated Yuan to be an International currency following USD. The step not was easy, as there were consequences to be borne by China. The same was set forth by Finance Minister Chatib Basri that if Yuan wished to be a global currency, it should be ready to be kept by other countries, such was the precondition.

The wish was not without risk. The precondition was that China’s balance of payment must not be deficit proof. If import was trigger than export, it means Yuan was kept by other countries, but if the condition was otherwise other countries would not keep Yuan. The implication was that China must be willing to be a country without deficit.

Other condition was that Yuan must have a sound underlying fundamental without external interference, so Yuan could flow in and out easily. Naturally if Yuan officially became a world currency, the impact would not be too significant on Indonesia although trade volume between Indonesia and China was significant.

The Capital Market

Index of IHSG at BEI continued strengthening last Wednesday [13/7] following regional stockmarket trends. IHSG was overbought but investors were still hunting shares. During pre-opening session, IHSG strengthened by 16.768 points [0.33%] to the level of 5,109.998 while index of LQ 45 rose by 4.388 points [0.56%] to the level of 877.731. Strengthening signal continued during transaction last Thursday [24/7] when IHSG was opened to strengthen by 20.227 points [0.40%] to the level of 5,113.452. Index of LQ45 was open to grow by 5.339 points [0.61%] to the level of 878.664. Buying spree was in all sectors; commodity and infra were investors’ target.

After announcement of electoral outcome by the Election Commision [KPU] on July 22, 2014 last, IHSG was constantly energizing. In the afternoon session, IHSG was under correction when the losing contestant suddeny walked out of the vote counting process. Somehow the next day IHSG moved up again, in tandem with shares at Wall Street which ended strong. Index of S&P 500 scored new record due to upjupm of apple Inc shares.

Regional stockmarkets strengthened simultaneously after having positive sentiment at Wall Street stockmarket. Index of Nekkei 225 inched up by 20.92 points [0.14%] to the level of 15,349.48 Index of Hang Seng strengthened by 76.52 points [0.29%] to the level of 2,084.54. Index of Straits Times increased by 6.45 points [0.19%] to the level of 3,347.15.

At regional level, most of the stockmarkets in the Asia Pacific region ended strong, following Wall Street which ended positively as investors no longer worried about political crisis in Ukraina. Europe’s stockmarket soared up to follow Asia. Bettered corporation performance served as positive sentiment to Europe’s stockmarket.

Stoxx Europe 600 Index inched up by 0.2% to become 343.25. This Europe stockmarket reference increased by 1.3% supported by emitent’s performance. For comparison. Asian stockmarket represented by MCSI Asia Pacific inched up by 0.4%. 16 stoxx 600 companies reported performance including Mercedez-Benz Daimler AG, producer of Glaxo Smith Kline Plc.

Shares of Daimler increased by 2.2% after reporting profit-before-tax and tax amounting to € 2.46 bullion. Azko Nobel, the biggest paint producer in Europe also elevated by 4.1% supported by profit which increased by 10%. Last Wednesday [23/7] Europe’s stockmarket restricted Russia’s access to the stockmarket in line eith the process of evacuation of victims of the fallen MH 17 aircraftt in Ukraina conflict zone. Mean while the Sydney stockmarket inched up by 0.6% or 33.41 points to be closed at 5,576,7

At the local stockmarket, noteworthy was the increasing trend of agricultural sector and mining which were the fastest growing zone. Increase in the two sectors were basically technical rebound after previously the two sectors posted notable price downturn. So far there was no macro sentiment strong enough to set propower pricing.

Only thing was that investors must observe development in the agro-sector which was subject to sentiment from the El Nino storm might disturb distribution of CPO so the potential to go up. But it turned out that El Nino was not as bad as predicated so price of CPO was reluctant to move up. Shares of other sectors descended reasonably: aneka industry [-0.21%] and finance [-0.03%].

This year end, positive sentiment would come from electoral outcome announced by the Electoral Commission [KPU]. On the other hand foreign capital was predicated to flow in as the economic climate turned more condusive to investment since it was known who the next President for the 2014 – 2019 would be.

Apparently IHSG during closing session this Friday [25/7] would strengthen in the range of 5,150 – 5,200 although most of the marketplayers were on holiday or were on hometown rush [mudik] for Idul Fitri. During opening session on August 4, 2014 IHSG stand a chance to strengthen to around 5,200 – 5,250.

Investors’ zest would bloom if good news at home kept comforting the market since the election outcome was announced. Some emitents were reckoned to take corporate action which injected positive sentiment to the market. (SS)

Business New - August 6, 2014

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