This week the default issue was more fearful than the domestic macro economy situation. At home, there were perceptions economic growth target could be attained if the Government was able to maintain people’s consumption and it could be positive sentiment to Rupiah. Understandable because Rupiah had been hovering around Rp.13,000 per USD.
According to BI Governor Agus Martowardojo. Might USD made countries whose transactions posted deficit, high inflation, and weak fundamental economy to have their currencies under pressure.
If the countries were making sound reformation and could minimize deficit like India, the country could build trust and Rupiah depreciation could be minimized.
Structural reformation was exercised by the Government by managing subsidy and food the better was, plus enhancing infrastructure development; but if there were policies rated by marketplayers as still conflicting and inconsistent, it could lessen credibility.
Per Q 1/2015, DBT ratio was posted at USD 3.8 billion or around 1.8% against GDP. Inflation per May 2015 came to 7.15% Y o y, high above the APBN assumption-P 2015 which was 5%.
It was right indeed for the Government to keep controlling inflation by some instruments like the Perpres Presidential Regulation Number 71 2015 on the Stipulation of price of essential needs. From the external factor, international creditors were said to be rejecting program of the Greece Government to end financial crisis, but they were forwarding a counter-proposal. News of the rejection was announced by Greece Prime Minister Alexis Trispas, faded all the hope of agreement signing between Athens and the creditors.
Greece need extra financial aid to save the nation from default to pay debt worth €uro 1.6 billion to IMF which was due by end of June. Too bad, the creditors refused to pay bailout if Greece was not willing to exercise further reformation.
IMF seemed to be the most skeptical in the Troika body which determined the amount of Greece bailout fund.
According to Tsipras, certain institutions peristed not to accept equal action taken by the Government of Greece. Rejections never happened before, neither in India nor in Portugal.
Tsipiras remarked further “This strange attitude could mean they hide one out of two points. They did not wish any agreement or they were serving some interest in Greece. The condition put Greece on a critical point because if they failed to pay, they could be kicked out of Grexit, or even worse kicked out of Uni Europe.
Last Wednesday (14/6) Finance Minister of Euro zone (Euro group) ran a meeting to discuss reformation in June. This seemed to rely on Greece to score surplus, which was believed to be very optimistic: axing of pension fund, increased income from the tax sector and privatization of companies.
If the proposal was approved, which was most unlikely, Greece would receive European fund worth euro 35 billion for financing economic development till 2020. Unfortunately Dimitris Koutsoumbas, Secretary General of the Greece Communist Party stated that Greece could not accept an “anti democratic agreement” with Uni Europe.
According to Dimitris, the people of Greece needed a comprehensive to Dimitris, the people of Greece needed a comprehensive plan to exit from the Eurozone and than common currency was not going to solve anything. The Uni Europe and German attitude could not be accepted. Greece’s past Government must also be accountable for it. Because of the this content, chances of Greece running another election this year is great.”
The coalition Government led by the Syzira Party only had 12 majority votes and most probably hard to offer a new proposal to their own Parliament.
Rupiah value at inter-bank transaction Jakarta last Thursday (25/6) inched down by 5 points to the level of Rp.13,306 per USD against the previous Rp.13,301 per USD. Rupiah value was moving flat with tendency to weaken against USD amidst marketplayers watching the case of bail out for Greece.
Officials of the eurozone last Thursday again negotiated to arrive at an agreement to save Greece from default after previously on Wednesday (24/6) failed to arrive at an agreement. The Uni Europe Summit would discuss various global development including the Greece case. The agenda would be the market’s focus this week.
Analysts said that if Greece at the meeting again failed to have bailout, the investment instrument tend to be under pressure including that in Indonesia. Evidently Rupiah weakened together with most of Asian currencies in respond to the situation in Greece.
However the market was sure that Rupiah weakening tend to be limited as BI released macro prudential regulation in the form of LTV or FTV ratio for property credit including KPR and reduction of down payment for automotive credit.
The policy was expected to keep the momentum of economic growth because the property and automotive sectors were related and had significant effect on other economic sectors. Meanwhile in BI mid rate last Thursday (25/6) Rupiah was seen to weaken to Rp.13,323 against the previous Rp.13,280 per USD.
Rupiah was the most depreciated currency in Asia last week which moved the varied way. Malaysia’s Ringgit was the second most depreciated currency next to Rupiah, down by 0.17% during closing session among others suppressed by Fitch who planned to lower investment in that country.
This week pressures on Asian currencies was still due to the Greek factor and the Fed planning to increase benchmark rate.
In the event that Greece failed to pay their debt, the effect could befall on middle income states like Indonesia, Brazil, turkey, India, south Africa etc. their currencies would weaken, but it would only be temporary.
By prediction USD would settle at above Rp.13,000 – Rp13,400 (26/6). This week Rupiah value would be in the range of Rp.13,250 – Rp.13,350 per USD. Most likely BI would be in the market to make intervention to keep Rupiah from falling into Rp.13,500 per USD as a new psychological level.
As known, the Greece debt crisis which had not seen any ray of hope made euro even sink deeper. Last week (25/6) the EUR/GBP was corrected by 0.21% to become 0.71197. Weakening of EUR/GBP and IMF was because the market was still waiting for meeting outcome between Greece Prime Minister Alexis Tsipras with leaders of Uni Europe (ECB) and IMF known as Troika which still continued on Thursday (25/6).
One day before Greece’ new proposal to increase tax and to axe pensioners fringe benefit was rejected by creditors. All in all the risk of Greece default to pay EURO 1,5 billion which was due on June 30,2015 would swell. Since last week no positive news was able to uplift euro.
Even if Greece finally get a new loan package, the sentiment would only support strengthening of Euro moderately.
Besides, Euro was still adopting eased money policy. On the contrary England tighten their monetary policy with speculations of increased benchmark rate policy with speculations of increased benchmark rate being supported by their impressive economic dat.
Data week marketplayers were still focusing attention on the Fed’s monetary policy as data of new homes buying in the USA turned better; Besides the prospect of increased interest when the Fed stated that America’s economy was ready to have 2 interest increase this year, i.e. in September and December.
The sentiment being awaited by the market was US GDP of the first quarter. The data showed state health of US economy.
The Capital Market
Index of IHSG was closed red during transaction last Thursday (25.6). Data of RTI showed that index inched down by 0.68% or 33.474 points to the level of 4.920.042. Apparently 166 shares went down, 96 went up and 89 stagnated.
Transaction on that day 4.5 billion lots of shares at the value of Rp.5.3 trillion. By sector, 9 out of 10 indices turned red. Index of consumer’s goods went down by 1.63%, basic industry down by, 1.51%. Only index of agriculture turned green or 0.22%.
Weakening of IHSG was in parallel with weakening of the global stockmarket. Hong Kong shares were falling, to stop continual strengthening over the past 4 days. Index of Hang Seng was down by 1% to the level of 27,145 Index of China Enterprises was down by 1.6% to the level of 13,467.90.
At BEI IHSG was striving to break through the psychological level of 5,000. To open transaction, IHSG inched down by 9.384 points (0.19%) to the level of 4,944.132 due to negative sentiment from the global market.
Index continued to nose dive since opening session. Premium shares were beginning to be released by investors. During closing session in Session 1, IHSG was axed by 19.243 points (0.39%) to the level of 4,934.273 due to pressures to sell by investors. Index was trapped in the red zone since opening session.
Only one sector remained strong, i.e. agriculture, and the rest fell into the red zone. Index failed to touch the green zone today. To close session on Thursday (25/6) IHSG was axed by 33.474 points (0.68%) to the level of 4,920.042 meanwhile Index of LQ 45 was corrected by 8.581 points (1.01%) to the level of 840.897. foreign investors were seen to make foreign net buy of Rp.150,306 billion in the entire market.
Trading was running moderately with frequency of 215,258 transactions and volume 4.523 billion lots worth Rp.5.321 trillion. 96 shares rose, 166 shares went down and 89 shares stagnated.
Meanwhile Asian stockmarket were closed to weaken with China’s stockmarket sinking deepest. Singapore stockmarket made it to elevate to the green zone. Index of Nikkei 225 weakened by 96.63 points (0.46%) to the level of 2059.22 points (0.95%) to the level of 27,145.75. Index of Composite Shanghai dropped by 162.37 points (3.46%) to the level of 4.527.78. Index of Straits Times rose by 4.71 points (0.41%) to the level of 3,356.04.
Not only Asian stockmarkets weakened, the never ending Greece drama made index of European stockmarket slump on the second day last Thursday (25/6). Index of STOXX Europe 600 inched down by 0.41% during opening session to 396.05. Furthermore index then went down by 0.76% to the level of 396.20 or down by 0.2%.
Negotiations between the Greece Government and Europe representatives ended without significant result Greece Prime Minister met with TROIKA this end of month to discuss phase 3 bail out extension this end of month and Greece had to pay first installment of USD 7 billion to IMF.
Under the circumstances IHSG would move in the range of 4,925 – 5,000 with positive sentiment from property and automotive sectors.
According to GAIKINDO sales dropped due to falling purchasing power and low commodity prices. GAIKINDO expected that infra structure could jack up sales.
This year the Government threw fund of Rp.290 trillion for infra-structure development. The figure was significant increase compared to 2014 which was Rp.240 trillion. Admittedly sales target for automotive sales would be hard to meet, therefore GAIKINDO set sales target of around 1 million to 1.1 million units of cars. The revision referred to sales of last May which dropped again.
With reference to GAIKINDO data sales of May was only 79.236 units or down against April at 81,600. Sales of last May was the lowest monthly sales of the year. Total whole sale of cars through January-May was posted at 443,000 units. The figure was a downturn of 16.6% against same period last year at 531,000.
Meanwhile sales of retail in January-May came to 432,000 units or down by 13.7% against same period the previous month at 51.000 units. With that downturn, GAIKINDO said that there was still positive development in the automotive credit. Last year car sales by credit was in the range of 70%-75%. This year in line with bank expansion or financing agencies, the position of credit cars constituted 80% to 90%. (SS)
Business News - July 1, 2015