Wednesday, 17 June 2015


Nearly 7 months since the new Government started to work, no positive data seemed visible that could satisfy marketplayers, what appeared were just disheartening data of Indonesia’s macro economy.

Minister of Finance Bambang Brodjonegoro had directly disclosed Indonesia’s latest economic condition to marketplayers. Bambang mentioned that economy only managed to grow by 5.4% this year, lower than the set target of 5.7%.

Analysts rate that the Minister’s frank statement could comfort the market. Meaning his projection was in accordance with reality afield. Market optimism was somehow enhanced by some of Government’s program being accomplished. Evidently Government’s expenditure of the first week of May 2015 had been absorbed 25% against 18% in Q 1 causing economy to grow by only 4.71%.

Some points were being under question by marketplayers, such as Government’s policy to prohibit export of raw metal ores. The Government stated they would continue to run the policy but accelerating smelter building process because thereby the downstreaming process minery industry could be enhanced.

Furthermore what would the Government’s measure be if foreign capital started to flow in. and how would the Government manage outflow of foreign currency for dividend payment. The Government would offer tax incentive to dividend being reinvested. Such was a strategic step, because historically there had always been swelling deficit in Q II and III.

Market players really needed encouragement through injected optimism by the Government, by realizing all the plans being announced since early this year. The projected 5.4% growth was in fact not too far from public expectation, including BI who also admitted that economy was projected to grow by 5.4% - 5.8% with downward trend.

Marketplayers also observed latest data of Indonesia’s trade balance in April 2015 which posted surplus of USD 454.4 million. Export was posted at USD 13.08 billion while import was USD 12.63 billion, so both export and import went down. BPS data showed that Indonesia’s export in 4th month of 2015 went down by 4.04% against March 2015.

Oil-gas export was down by 26.68% to become USD by 0.17% from USD 11.65 billion to become USD 11.63 million. The minus factor was in oil gas which constantly dropped.

Accumulatively through January-April, export was posted at USD 52.14 billion or down by 11.02% (y o y). Non oil-gas export was posted at USD 44.98 export was fat and animal/vegetable oil USD 6.42 billion. The biggest was frying oil. Export of mineral fuel was USD 6.10 billion while coal was on top.

In export, the biggest market share in April 2015 was the USA USD 5.15 billion. Next was Japan at USD 4.47 billion and China USD 4.31 billion. Meanwhile import of the previous month was posted at USD 12.63 billion or up by 0.16% against March 2015. Import of oil gas was down by 3% from USD 2.27 billion to become USD 2.34 billion and import of oil gas was down from USD 10.34 billion to USD 10.29 billion compared to April 2015 down by 22.31 from USD 16.26 billion.

Accumulatively January-April import was posted at USD 49.36 billion or down by 17.02% Import of non-oil gas was USD 40.92 billion or down by 8.64% (y o y). Import machines was USD 7.72 billion while machineries and electrical equipments was posted at USD 5.27 billion. Indonesia’s biggest import was from China amounting to USD 9.85 billion. Next was Japan USD 0.05 billion and Thailand  USD 7.74 billion.

The Moneymarket

Rupiah value was projected to vary during transaction last Friday (15/5). Downturn of USD posed as positive sentiment to Rupiah together with other currencies in Asia. During opening session at the spotmarket, Rupiah elevated to Rp.13.045 per USD against closing session of Thursday (13/5) at Rp.13.055.

Just like IHSG Rupiah was now able to invigorate to positive zone. The continuing weakening of USD index means advantage to Rupiah to strengthen, moreover USD course was also balanced by strengthening of ¥en as Japan’s positive data was released to block the Yuan effect.

Beside the still unimpressive US economic data signaled would be no increase of FFR made sooner which energized Rupiah. Unfortunately Rupiah was again shaky unless there was sentiment strong enough foe Rupiah to rebound.

Rupiah had expectation to rebound as USD was losing steam. Rupiah was in the range of Rp.13.000 – Rp.13.100 by closing session last Friday (15.5). Each year, Q II was the time to be on the alert about national macro stability. At that time Current Account Deficit was predicted to swell due to repatriation of asset or dividend and payment of overseas debt due.

All the sentiments would suppress Rupiah low down. Last year CAD of Q-2 came to USD 8.94 billion on 3,97% of GDP. BI as monetary authority had to anticipate the risk seriously. The big risk in May and June was a structural problem. Many foreign companies were paying dividend abroad so it would not be easy to put the blame on currency alone.

What BI had to do was to make sure there was no turbulence in capital inflow. So bank interest remained high at 7.5%. When overseas debt was due, it was necessary for BI to persuade private companies to do hedging.

In fact the Government had opened wayout for dividend problems by facilitating tax allowance for re-invested dividend, but to investors what matters was a conducive business climate.

It’s a pity that the new policy could not be felt of its benefit in second quarter of next year since the regulation was not effective this month of May. All in all, Rupiah value would in the near future pressed down to Rp.13.000 per USD till end of year. Economist warned of the possibility of CAD swelling by Q-2 which was inevitable because the season cycle had already been formed. Other cause was high importing toward Ramadhan and Idul Fitri.

What BI had to anticipate was to make sure that supply of USD was available because at the moment it could be difficult to rely on export alone. The Government could also release a global bond sooner like the Sukuk. Issuance of the global bond would hel to increase Forex reserves so it could reduce pressures on Rupiah.

Not less important was that the Government must spur on their spending. Investors must be sure that the Government had their commitment to build infra structure while BI must not sit on their laurels.

The policy on hedging which recommended prudence in managing private overseas debt since early this year had helped to ease pressures. BI had persuaded corporations to do hedging by using fund prepared for long. In case of forex reserves, BI did not set any certain nominal amount. Now the amount was USD 110.8 billion.

Meanwhile the Government would apply stringent taxation rules to make sure that companies had enough bumper fund to cushion debt invoices so companies could manage their overseas debt better while increasing income from tax. To be exact, the Government would only acknowledge payment of interest as tax reducer if debt-to-equity was not more than 4 to 1.

The Government saw that private overseas debt on increasing and this was perceived as big risk by investors. The Government would improve that so overseas debt would not soar high too soon. As known today there was no rule that restricted ratio of cash bumper against debt and the Government acknowledged interest as tax reducer.

However the sectors of finance, oil and gas were exempted from the rule. Previously BI had reminded private companies who were not going hedging since today Rupiah was the worst currency in the emerging market.

Indonesia’s Overseas Debt had been growing fast few years. In February 2015 total private debt was USD 164.13 billion, up by 13.8% against same month last year and nearly double that of 2010. Tax regulation which commended companies to be prudent in managing it would be released this year and be effective next year to allow a period of transition.

On the other hand, tightening of regulation would mean a niche for the Dir. Gen. of Tax to collect higher tax from companies who had debt-to-entry ratio higher than required. The Government’s action was accepted by the private sector. From the above picture it was clear that Rupiah curveline this week would stagnate around Rp.13.000 - Rp.13.100 per USD due to lack of positive sentiment,

The Capital Market

Index of IHSG inched up by 6 points to open session in “national long week end” last week (15/15). It was interesting to know that investors had not stopped releasing shares. During pre-opening session, IHSG inched up by 6.294 points (0.12%) to the level of 5,252,427 while index of LQ 45 inched up by 1.599 points (0.18%) to the level of 912.583. Domestic investors were still zealous about buying shares after Ascension Day holiday on Thursday (14/5) last. Commodity shares were the object of selling spree y foreign investors.

For 2 days last week IHSG index went up by 40 points amidst heavy outflow of foreign capital from the stock hall. Domestic investors were the most passionate to buy shares. Meanwhile shares in wall street strengthened with index of S&P 500 soaring high to the latest record on Thursday (14/5) driven by shares of Apple, facebook an other technological shares.

Index of S&P 500 rose by 22.62 points (1.08%) was closed higher than the previous record of 2,117,69 on April 2015. Index of Dow Jones Industrial Average (DJIA) soared up by 191.75 points (1.06%) to 18,252,24 while index of Composite Nasdaq points increased by 69.10 points (1.39%) to become 5,050.80.

Analyst believed that up jump of index were mostly due to technical factor, such as market capability to rally. For several times analyst had one or two gig increase, but no follow up on the ensuing days. New S&P record reflected market resistance of the US stockmarket tanks to eased monetary policy in spite of poor US data, as indicated by flat sales in April.

Apple, the biggest company in terms of market capitalization, jumped up by 2,3%, Other profit made by facebook went up by 3.7%. Microsoft rose by 2.3% and many technological shares including Gilead Sciences grew up by 2.2%. Giant Retailer WalMart-Stores inch up by 0.7% as they launch a trial program in America which gave daring on-line goods delivery unlimited for USD 50 per year, and entering it to direct competition with Amazone Premium Service.

The Kohl Supermarket was the latest big retailer which reported disappointing outcome, fell by 13.3% after sales of first quarter USD 4.12 billion, below USD 4.19 billion projected by analysts. Avon Cosmetics products rose by 6.0% after takeover offer which turned out to be fake of an entity who called themselves PTG Capital Partners. Avon said that they did not accept offer from PTG “and could not confirm the existence of the entity”. Meanwhile price of bonds of the US Government was posting increase. Return of US Bonds of 10 years tenure dropped to 2.24% against 2.29% wile in bonds of 30 years tenure dropped to 3.06% from 3.08%. the price and return of the bond moved in opposite directions. In short, the marketplace in Wall Street was closed positive as investors’ fest cooled off about increased FFR and weakening of USD. Weakening of USD enable multi-national companies in that country to run bigger turnover. USD value descended to its lowest level since January against currencies of US trade partners. However it was good news to companies posting big exposure abroad.

Furthermore there were expectations that the Fed would not increase their benchmark rate in Semester 1 2015. Chances of it was still fifty. Economic players and the stockmarket focused their attention more on economic activities rather than speculating when FFR would be increased.

Meanwhile regional stockmarket were varied during session on Friday (15/5) with tendency to strengthen. Only China’s stockmarket was corrected. Index of Nikkei 225 rose by 136.18 points (0.70%) to the level of 19,706.42.42 Index of Composite Shanghai weakened by 27.21 point (0.62%) to the level of 4,351.10. Index of Straits Times inched up by 3.37 points (0.10%) to the level of 3,459.15

This Week, stockplayers must observe the development of policy and economic data that came out. One of them was data of survey outcome of Retailers sales which indicated that on yearly basis retail posted increase in March 2015. This was reflected in Real Sales Index (IPR) March 2015 amounting to 175.6 growing by 19.3% (y o y) an increase against 16.0% (y o y) in February 2015.

The highest growth rate in household equipment category from -2.6% (y o y) to become 15,2% (y o y). Increased sales in other household equipment which was driven by sales of clay-based building components like roof, tiles, sand and other building materials like pipes and plastic hose. By region, Bandung again posted IPR annual growth (67.1%).

Annual growth of retail sales was again predicted to increase by April 2015. The condition was visible in IPR estimate of April 2015 at 178.8, growing by 23.6% (y o y) higher than 19.3% (y o y) the month before. Highest growth was predicted to happen in information and communication categories at 37.0% (y o y).

Slowdown of growth was happening in all types of homes expect small types of houses posting higher price increase (1.98% qtq) of 1.43% increase (q t q) of the previous quarter. Pressures from price increase was predicted to continue in Q II-2015.

Low performance of the property was indicated by slowdown in sales of property in Q-1 2015 (26.62% q t q) against 40.07% (q t q) in previous quarter. Slowdown was in sales of medium type houses. The development was in parallel with slowdown in KPR mortgage sales.

Survey outcome also showed that financing of residential property still relied on internal funding. Most of the developers (61.08%) use their own fund as financial resource.

Meanwhile financing resources for buying property was still mainly KPR mortgage. 75.45% of respondents were still relying on KPR as source for buying residential property.

Apparently IHSG was meandering the varied way during transaction last Friday (15/5) to move to wars 5,225 – 5,275 with tendency to elevate due to external sentiment but low transactions related to log week end.

This week IHSG was continuing to strengthen in the range of 5,250 – 5,325 in spit of all discouraging news. For example statement of the Real Estate Indonesia (REI) who rated that amendment of Pph tax Article 12 about sales tax on luxurious property would affect consumer’s psychology especially during the initial stage of effectiveness.

However REI was confident that property sales would not drop, as economic climate would predictably be better especially in Semester II/2015. According to REI the downgoing trend of property sales which slumped by 540% - 50% in Q 1-2015 against last year was more caused by economic slowdown rather than implementation plan for the new regulation. Somehow REI was relived as BI stated that Indonesia’s economy was still good, so the public could be comforted.

Sales of luxurious homes especially those priced above Rp.5 billions were rising in some cities like Jakarta, Surabaya, Bali, Semarang, Yogyakarta and Palembang. Although still little by percentage, i.e. around 2% - 3%, REI dared to set target of growth for this year at 10% the way it happened in 2014. REI was still optimistic that soon if there was better policy in Q-3 or Q-4 the Government would have extended infra structure development fund and building of one million homes would go well.

As known, through PMK No 90/PMK.03/2025 the Ministry of Finance had revised tax imposition of luxurious goods (Pph 22) for property. Previously property categorized as super-luxurious were property priced above Rp10 billion and/or built on 400 m2 land for apartments.

Today the price limit fore homes and luxurious apartments were lowered to Rp.5 billion; minimum size 400m2 for homes and 100 m2 for apartments. The tariff for PPh 22 remained i.e. 5 percent to be effective per end of ay 2015.

Stockplayers were advised to observe launching of IPO by would-be emitents in first of this year, public offering was still quite. Pressures on domestic stockmarket was the reason for reluctant IPO. So far there were only 2 companies entering the stockmarket. Three other companies were launching IPO in Q II. This year 2015. All in all if 2 IPO were run, only 5 companies had entered the stock hall through Semester I/2015.

For comparison, in Semester II/2014 there were 12 companies running IPO, 7 of them in Q II and yet at that time political temperature was high as general election was on. (SS) 

Business New - May 20, 2015

No comments: