RUPIAH AND IHSG STILL HAUNTED BY TROUBLED GREECE

The Moneymarket
           Over the week the Indonesian moneymarket would still have to face the unending problem of the crisis in Greece, whivh was indicated clearly last week when the moneymarket was under heavy pressure. Asian stock index and currencies in Asia was in turbulence since market players were nervous about the slow process of recovery in Greece which triggered spiral effect on Euro states.

          It was fortunate for Rupiah that early last week (25/5) Rupiah managed to strengthen significantly against USD by 1.38% to the level of Rp 9.335. Strengthening of Rupiah was in tandem with weakening of USD against some Asian currencies.

        Beside Rupiah, USD was also losing energy against 5 other Asian currencies i.e. USD. Australian Dollar, Hong Kong Dollar, Singapore Dollar, and Indian Rupee. However three Asian main currencies Japanese Yen, China’s Yuan and Korean Won weakened against USD.

        Previously Rupiah value against USD was predicted to weaken because the market was predicted to weaken because the market was still referring to the scenario of Greece walking out of Uni Euro. The potential of Rupiah weakening out of Uni Euro. The potential of Rupiah weakening was among others on account of market sentiment which tend to be negative. Market players were still waiting for signals from Greece whether they would stay in the Euro zone or quit.

            Moreover, the market would also focus attention on the political problem of Greece toward re-election on June 17, 2012. Therefore Rupiah tend to weaken in the range of Rp 9,325 – Rp 9,400 per USD this week. The external factor was more prevalent especially if the scenario was Greece walking out of Uni Europe. It was feared that Portugal, Italy and Spain would also quit from Uni Europe since they had debt problem of the same nature as Greece.

            Evidently Euro nosed dived to the lowest position against USD since July 2010 after speculations at G-8 di not lead to any new step to overcome debt crisis of the Euro zone. Euro weakened by 0.8% to the level of USD 1,2582 after previously touching USD 1,2545, the lowest position since July 13, 2010. Against Yen, Euro also slumped by 1.4% to the level of 100 Yen after previously falling to the level of 99.54 yen. Meanwhile Yen inched up by 0.6% to become USD 79.47.

            Euro was continuously losing energy since this collective currency dropped to below 100 Yen per Euro for the first time since February 2012 and sank to below USD 1.26.

            At home in Indonesia, negative sentiment came from emission of Sukuk Global Bond Indonesia which did not sell well, i.e. Rp 550 billion of the targeted Rp 1 trillion. This was a follow up respond after data of Indonesia’s export fell into three lowest years. The condition means opportunity for Bank Indonesia to lower BI rate from the present level of 5.75%, which would automatically pose as negative pressure on Rupiah.

            Furthermore investors would turn to other instrument to make bigger yields. They were beginning to chase SBN State Bonds the price of which went down last week causing increase of yield to the highest level since December 2011 caused by increased inflation expectation.

            Yield of SBN Bond for a period of 10 years reached highest level since December 2011 because of the possible default of Greece which made investors leave the Euro zone. Yield of SBN rose by 0.06 percentage point or 6 basic points to become 6,31%. The highest level since December 15, 2011. Through the month of May, yields had risen by 36 basic points.

            Increased inflation expectation was on account of negative sentiment from the global market because of the debt crisis in the Euro zone. Political crisis busted out in some countries where the new regime was against austerity measure, which was the reason why Greece went default and most probably create contagion effect on other troubled nations like Portugal, Italy and Spain.

            Today the globel economic condition in Europe was far from certainty, not to mention the fact that Greece was going to quit from Uni Europe so investors were extremely hesitant to invest. In the event that Greece actually quit from Uni Europe, USD would strengthen and investors would choose to hold American bonds rather than bonds in local currency. Moreover there was no sign of certainty in Government’s policy on subsidized oil which was the reason why investors were hesitant about entering Indonesia.

            On the other hand the Government was badly in need of cash to realize the APBN-P State Budget which was why the Government was forced to borrow money. In regard to that matter economists and analyst believed that it was best for Bank Indonesia to make market intervention, so price down turning of SBN bond needed not to continue. If price of SBN bond continued to drop investors might release them; they would continue acts of selling and choose assets in the from of USD and this could mean a threat to the moneymarket in Indonesia.

            No doubt BI would strive to rescue Rupiah; they would limit Rupiah at bottom-line. So Rupiah’s survival would depend on BI’s strength to resist USD pressure.

The Capital Market

            Technically index of IHSG and BEI Security exchange were under selling pressures, the nearest support being at 3,950 level and the next support at 3,910 level. Market players still had to observe global sentiment which could lead index to move sideways with the tendency to weaken any moment.

            During transaction last weekend (25/5) IHSG moved sideways in the range of 3,925 – 4,025. If IHSG weakened it means only to continue previous weakening dropping by 39 points (-098%) to the level of 3,981.57. Nearly all sectors of shares flopped yesterday except various industry and consumer goods.

            At the regional stock market the positive sentiment from Europe made the index continue to roll like a rolling snowball because shares of the Asian states strengthened consecutively during different sequence of market. When share of New Zealand strengthened, it was turn for the stock market of Australia, Japan and South Korea to ascend to green zone during initial transaction last Friday (25/5).

            At the Tokyo stock market, the highest strengthening was in index of REIT 1.18%, while lowest strengthening was posted at index of TOPIX 30 at 0.3%. In Seoul stock market the highest strengthening was in index of KOSDAQ at 1.15% whilst lowest strengthening was posted in index of KOSPI 0.54%. Meanwhile in Australia’s stock market strengthening of index was considerably the same in the range of 0.2%.

            At Wall Street stock market indices tend to be fluctuation end ended up to strengthen thibly. Unfortunately index of the technology sector in Nasdaq was under pressure which stagnated strengthening process. The three main indices in America’s stock market drifted negatively throughout transactions. There was no strong reason for investors to buy any share since America’s and Europe’s economy were still in the state of slowdown.

            Data of closing session on Thursday (24/5) showed that index of Dow Jones Industrial inched up by 33.60 points (0.27%) to the level of 11,529.75. Index of Standard & Poor 500 strengthened to the level of 1.82 ponts (0.15%); index of Komposit Nasdaq fell by 10.74 points (0.38%) to the level of 2,839.38.

            Index of Dow Jones was advantaged by strengthening of Hewlett Packard which rose by 3.3% to the level of USD 21.77 after planning to dismiss workers for austerity in the next few years.

            As a whole the future of Greece and Europe would still be the focus of investore, at least half of the countries in Uni Europe prepared for anticipative plan in case Greece decided to exit. Various reports disclosed that investors still tend to wait and see about the Summit Meeting outcome and ad hoc of European Leaders (G-8) on the efforts of crisis solution in Greece. Investors feared that the meeting would drive Greece closer to the verge of exit from the Euro zone.

            The possible impact of crisis on global economy was part of investors’ anxiety. Furthermore downturn of economic state’s performance in Asia contributed to investors’ perception, especially since Fitch rating agency lowered rating for Japan.

            Back to BEI local security exchange, although index of IHSG once bolstered up to above 4,000, sentiment wise IHSG was still haunted by debt crisis in Europe, moreover with statement of the Greece Government to walk out of Uni Europe. Besides there was minimum positive sentiment from the local side so the market tend to refer to external factors. All the sentiments were technically reflected in index curve line which showed that IHSD was still in the phase of bearish.

            Above all, some sectors were still considerable, among others the sectors of property, various industry, trading, consumer goods, banking and coal mining. Although IHSG was in the phase of bearish and trend was turning down, the said shares were perceived as cheap which gave room for fluctuation, and time for investors to decide. It was predicted that IHSG would move in the range of 3,935 – 3,975 this week.  

Business News - May 30, 2012