Greece finally fell into
default after minute to minute of hard struggle without result. Somehow the
Eurozone never gave up to find solution before referendum run on July last to
breeze out hope for the market. IMF confirmed that Greece was unable to pay
their €uro 1.6 billion based on the agreed schedule.
For that matter the Executive Director of IMF Cristine
Lagarde would report to the Board of Creditors that Greek ‘postponed payment’
which was the official word for ‘default’. Greece was entitled to receive
funding in the future from global creditors if the amount due was settled.
Greek Prime Minister Alexis Tripas asked for extention of
payment deadline. Around 11 hours before deadline, Athens asked for 2 year
extention of international bailout deadline and financing. Realizing the
consequences if the great debitor quits from the Eurozone, Euro Executives
never gave up to find a way out.
Euro group stated they would discuss request for credit
and rescheduling of credit. Still it was not clear to what extend agreement was
arrived at. As there was friction between Athens and the capitalists of Europe
after five long months of negotiation without result, relationship between the
two worsened as Greece rejected the proposal and choosed to run referendum.
Such was the reason why some Asian currencies were
suppressed in the past few months. The condition was felt last May when Asian
currencies rushed for a high position amidst uncertain condition.
Starting with shocking outcome of Election in Britain,
positive data of Uni Europe mixed with Greek anxiety over Greek unending
problem, unstable US economic data and the downfall of ¥en, all the factors made investors to
be more cautious.
Statement of Bill Dudley, Head of New York Federal
Reserve about his doubt when the Fed would increase FFR, had accelerated
momentum of Euro strengthening. Some currencies were shaky being triggered by
those issues.
After arriving at highest level at 1.1446 and stable for
a few days at 1.14 regionally, Euro and USD dropped drastically in two
consecutive weeks. Steep downturn happened in mid-May 2015 as news spread out
that Greece had used the emergency saving for paying IMF.
When Greece announced that they could not afford to pay
of debt by end of May 2015, the Euro – USD pair again fell to the level below
1.10. After touching the lowest level against USD on April 2015, surprisingly
Poundsterling was fortune to move up by early May 2015 when election outcome in
England showed victory for the Conservative Party.
Investors were changing to poundsterling with fresh
confidence. The value of Poundsterling continued to move upward as Bill Dudley
made a statement on May 12, 2015 which denied expectations that the Fed would
increase bank interest in the near future, combined with the news that Greece
would again suffer crisis on May 13, 2015. At the same time the Governor on BoE
stated that inflation in England posted negative value or -0.1%.
With all the confusing news in the USA and Europe over
the first half month of May, Yen succeeded to maintain stability against USD at
118.5 and 120.0 when positive data from the USA and negative news from Europe
and England by end of month buoyed USD up, Yen descended gradually.
The Moneymarket
Rupiah
during inter-bank transaction on Friday day last (3/7) strengthened by 17
points to become Rp.13,308 against the previous position of Rp.13,325 per USD.
Rupiah still managed to settle at positive level although moderately, as
players of the money-market were still anticipating result of the Greece
referendum and creditor’s respond to the referendum outcome. Weakening of USD
was also on account of non-farm payrolls in June which was below market expectation.
Other economic data that served as market propeller were
among others index of activities of the service sector in Spain and England and
data of retail sales in the Euro region, which influenced the global moneymarket.
Market expectations that accelerated absorption of budget
for infra structure development by the Government in Semester II would
strengthen Indonesia’s fundamental economy increased positive sentiment for
Rupiah which at the moment was notably stable.
Previously USD strengthened against Euro as Greece fell
into default in debt payment to IMF. This European common currency was under
pressure when Greek Finance Minister Yanis Varoufakis stated that Greece would
not pay bebt installment to IMF which was due on June 30.
Greek Prime Minister Alexis Tsipras furthermore stated
that the Government of Greece proposed a deal of two years credit based on the
Europe Stability Mechanism in the last minute effort to prevent default and the
possibility of Gexit. The statement was made a few hours before the bail out
fund would end on Tuesday last week (30/6) amidst mounting anxiety over fearful
Greek economic condition.
In the USA, the Conference Board Research Group based in
New York stated in their monthly report that US Consumer Confidence had been on
the upturn in June. Index rose from 94.6 in May to 101.4 in June, way above the
market consensus of 97.4.
To end transaction in New York, Euro fell to USD 1.1144
against 1.1248 the previous session and Pound sterling slumped to USD 1.5731
against USD 1.5736 the session before. Australian Dollar inched down to USD
0.7714 against USD 0.7703. USD was worth ¥en 122.46. USD inched up to Swiss France 0.0349 against
the previous 0.9264. Against Canadian Dollar, USD inched up to 1.2494 against
the previous 1.2494 per USD.
Meanwhile German Kanselir Angela Merkel underscored that
Germany would not discuss Greece’s new request before the execution of
Referendum on July 5 2015. Nearly one out of every two Greek citizen voiced
‘No’ in the Referendum of bailout package being offered by creditors. However,
the capital control policy put in effect by the Government made many voters
change to ‘Yes’.
The Referendum conducted by Prorata from Sunday (28/6) to
Tuesday (30/6) as the Greek Government applied tight Capital Control and closed
banks as negotiations failed. Before the Government put capital control in
effect, 57% respondents choosed ‘No’ 30% choosed “yes” and 5% abstain.
However, after the Regulation which restricted cash
drawing to €uro 60 at ATM effective on Monday (29/6), the number of citizens
who choosed “Yes” increased. In the Referendum run on Tuesday (30/6) 46%
choosed “No” while 37% choosed “Yes” and 17% had not decided.
The case of Greek default would predictably bring
negative effect on Indonesia although only temporarily perhaps not more than
one month. Indonesia had any significant bilateral business relationship with
Greece.
Greece default would bring negative effect on Asian
currencies including Rupiah so Rupiah would be under pressure at around Rp.13,300
– Rp.13.400 per USD.
Somehow Rupiah would not het any lower than Rp.13,500 per
USD because the Government and BI would surely act although in fact there was
not much that the Government could do to keep Rupiah from sinking any deeper because
the Greek crisis was external factor; this was not to mention speculations that
the Fed in America would increase FFR.
In fact the US Government did not like it either to see
Euro fall because it might make USD to be see strong against other currencies
as it might backlash on US export and worsen US export performance.
One thing was sure the Greek crisis would still be felt
week especially when the new policy of the Greek Government was still in
effect. Firstly all banks stopped their activities from June 28 to July 6.
Secondly, bank customers were permitted to draw cash from ATM not more than €60
or USD 66 per day, per card and per account, but cardholders were permitted to
draw cash using credit card or debit card abroad. Thirdly transfer or payment
from a Greek bank to overseas bank was forbidden for the next week.
They also announced that the Regulation on liquidity
could be extended for more than one week. One thing was sure that the faith of
Greek banks was determined by the outcome of Referendum on July 5 last. Greek
Prime Minister Tsipras decided to run a referendum to pocket people’s approval
or rejection to the preconditions set forth by creditor countries. The
referendum outcome would determine Greece status as member of the Eurozone.
Announcement of the Referendum outcome and tight
liquidity brought anxiety to the people Greece and people’s trust was fading
out. Long queque at the ATM and gas station was common sight in the cities of
Greece. Moreover Fitch rating also demoted rating for four banks in Greece.
Moreover Fitch rating also demoted rating for banks in Greece to “limited
default” last Monday (29/6) as the Government commanded commercial banks to
close for a week to make capital controlling.
Fitch stated that capital control including limitation to
daw cash by customers was the same as “limited default” because limitation of
deposit affected obligations banks senior executives. Four banks were demoted,
all at CCC which means “very speculative” were National Bnak of Greece, Pireaus
Bank, Euro Bank Ergesias and Alpha Bank.
The rating reflected high credit risk, because of
execution of capital control or prospect of recovery in terms of default. Fitch
lowered rating of same banks to below of or “Fail”.
Lowered rating reflected Fitch’s view that the banks had
failed and would fail to pay before control was executed, because the banks
were highly dependent on Europe Central Bank and decided not to increase
liquidity because of the Government’s action.
At home in Indonesia, the external condition made it hard
for Rupiah to go to below Rp.13,000,- per USD. Every effort to strengthen
Rupiah lasted only for a moment because USD was still the main buyers’ target
at the global market. The news of Indonesia growing by only below 5% (4.7%) in
Q 1 2015 was disadvantageous to Rupiah through May 2015. The downturn was triggered
by Janet Yellen’s statement that the US Central Bank would still increase FFR
this year would suppress Rupiah.
The Capital Market
IHSG index rose by 12 points after fluctuating last week
end (3/7). Slowly index was crawling last back to the psychological level of
5,000. IHSG inched down by 4.504 points (0.09%) to the level of 4,940.277 but
bounced back again to the green zone. Negative sentiment from the global market
overshadowed index movement. Meanwhile index of LQ45 strengthened by 3.536
points (0.42%) ri the level of 852,450.
Index fluctuated not long after opening session. The
highest position was last week at 4, 960 and was projected to be closed at
4,970 – 4,990, Domestic investors made selective buying of premium shares while
foreign investors tend to wait and see.
Most regional stockmarkets fell into the red zone being
affected by negative sentiment from Wall street. Index of Nikkei 225 weakened
by 68.25 points (0.33%) to 20,454.24. Index of Hang Seng inched down by 59.55
points (0.23%) to the level of 26.222.7 Index of Composite Shanghai dropped by
127.20 points (3.25%) to 3,785.57. Index of Straits Times inched up by 7.66
points (0.23%) to the level of 3,335.50.
Previously during transaction last weekend (29/6) IHSG
nose dived to below 4,900. IHSG was opened to drop by 26.77 points to become
4,896.23 being affected by Greek problem. Investors responded negatively to
failed negations in Greece.
As selling spree by investors at the stockmarket had not
subsided, BEI was fluctuating quiet highly. The condition originated from
domestic and overseas sentiment, moreover investors were now more prudent in
investing their capital.
The psychological effect of Greek default could be more
terrible than the real effect. As known, the condition of Greece today was full
of political frictions. In Indonesia, the stockmarket was not too much affected
by Greek case of default.
Investors needed not to worry too much about the negative
effect of Greece crisis. IHSG index that fell this week was no sign that the
condition of Indonesia’s stockmarket was in adverse condition.
So the domestic issue must be well managed and be
observed by stockplayers. For example, the Loan-to-value policy for automotive
credit would have positive impact on automotive credit would have positive
impact on automotive sales at home. However the real impact would only be seen
in Q III this year or by end of September.
Marketing performance was really unpredictable. Gaikindo
only dared to set target for automotive sales at 1 million units and this was
due to people’s low purchasing power. Basically the LTV Regulation promised
ease to customers at early phase of credit. Although down payment was lowered
by 5% against the previous 30%, the monthly installment increased.
The impact to investors was also seen after seeing
consumer’s zest. It would be better if the LTV easing policy be accompanied by
lowering of credit interest for automotives, but the impact for investors would
be positive because with less down payment, people’s purchasing power would be
stronger. The public must be seen whether they like low down payment with high
installment, or high down payment with low installment, or high down payment
with low instalment?
Transaction at the stockmarket would heighten with LTV
easing for property and automotive credit. The easing was not only for KPR
mortgage, but also for other consumer products including automotives which was
a step to invigorate the market in the respective industry.
In the end energized automotive sector and their share
transactions would propel economy to progress once more. On July 18 last, BI
started to out in effect easing of LTV down payment and property credit.
For automotive credit BI had decided to lower Down
Payment up to 5%. With relaxation of LTV, the automotive sector could accept
acceleration of sales whereby to increase financing growth.
By April 2015, credit financing only grew by 7% (y o y).
if the new LTV for automotive credit began, it was expected to turn into growth
stimulus for financing, the automotive industry was slowing down in sales but
still growing because sales of four wheel or two wheel vehicles was not only
for new products nut also second hand products.
The potential growth for second layer shares was still
open for Semester II. The sectors of trading, service and investment would be
buoyed by annual cycle, i.e. the moment of Ramadhan, Lebaran and Christmas
which increased household demand.
Besides, the policy for property ownerships for foreign
citizens was predicted to increase demand for property.
In Semester II infra structure development by the
Government and acceleration of budget absorption would begin to roll.
Performance of the infra structure project would be driven by Government
projects which would run and absorb fund faster. In case of mix industry the
policy the policy of down payment easing would jack up sales. The consumer
goods sector also had the potential to grow as investors believed that this
sector was quite defensive.
Many analysts predicted that the five sectors:
telecommunication, animal farming, banking, essential needs and infra structure
in Q II/2015 would be positive. The five sectors were predicted inject positive
sentiment to IHSG during last closing session at around 4,980 – 4,520. (SS)
Business News - July 8, 2015
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