Thursday, 11 October 2012


The Moneymarket

This week and onward Rupiah value was projected to embark on an era of consolidation after struggling head over heels against global economic uncertainty. The America, Europe and China factor would still overshadow Rupiah movement and IHSG stock index.

Last weekend, (10/8) Rupiah exchange rate value against USD was predicted to consolidate. The market responded to the economic data of the USA and China and Europe Central Bank (ECB). Rupiah consolidated in tandem with release of unemployment data in the US. The data breezed out hope to the market of Quantitative Easing (QE) of the third phase. Unemployment claim in the USA was predicted to increase to 371 thousand against the previous 365 thousand. Therefore Rupiah would consolidate in the range of Rp 9,450 – Rp 9,480 per USD.

As footnote, Rupiah value against USD during transaction on Thursday (9.8) was closed to inch down by 5 points (0.052%) to the level of Rp 9,470/Rp 9,473 per USD. Indonesia’s sizable trade deficit, which reached USD 13 million in first Semester of 2012 was rated as having negative impact on Rupiah curveline against USD.

The market also saw that increased index in the stokmarket and bond market did not significantly uplift Rupiah value. The higher deficit, the harder it would be for people to seek for USD in Indonesia and this was point that made USD value more expensive against Rupiah.

The high value of USD was caused by import which tend to be high and caused the market to run short of USD. Moreover Indonesia’s need for import would continue to increase amidst downturn of export to countries predicted of having economic slowdown like China, the USA and Europe. All in all USD would be drained in the local market as Corporate rushed to find USD to cover their import expenses.

However, till end of year Bank Indonesia would strive to maintain Rupiah at the level of Rp 9.400,- - Rp 9.500,- against USD because such was felt to be acceptable to many parties. According to BI Rupiah exchange rate in July 2012 was still being depreciated due to global crisis and economic slowdown in China.

Rupiah by point to weakened by 0.56% - (m t m) to the level of Rp 9.445 per USD or weakening on the average by 0.29% (m t m) to become Rp 9.433 per USD. In addition to that downturning of export also added pressures on Rupiah. For that matter BI kept observing the balance in the forex market with the aim of stabilizing Rupiah value.

Inflation based on Consumers Price Index (IHK) was posted at 0.70% (m t m) which on annual basis means 4.56% (y o y). Increase of some commodity price had begun some weeks before Ramadhan in line with increasing demand and increasing production cost and limited stock from the domestic source or from import.

The season factor and flaring food prices, domestic or global, had driven up core inflation in July of 2012, but still at low level (4.28%), Meanwhile inflation of administered prices was posted at minimum as there was no Government’s policy on prices of goods and services which were strategic.

In the future, in spite of inflation pressures from fluctuating food price, inflation of 2012 and 2013 would still be within the target range of 4.5% - 1%. Generally speaking, weakening of Rupiah last week was triggered by investors who were actually anxious about slowdown of world’s economy.

BI would also safeguard Rupiah’s fluctuation through monetary policies. Meeting of the Board of Governors of BI last Thursday (9/8) decided to maintain BI benchmark Rate at 5.75% because it was still in accordance with low and controllable inflation in accordance with inflation targets 2012 and 2013 at 3.5% - 5.5%.

BI saw that Indonesia’s economic performance was strong amidst slowdown and uncertainty of the global financial condition. Economic growth of quarter II 2012 reached 6.4% - being sustained by consumption and high investment. This was followed by growth of import which was notably high.

However, export growth sank deeply on line with slowdown of global economy abd downturn of global commodity. Meanwhile on the sectoral side, economic growth was sustained by three main sectors i.e. the processing industry, trading, hotel and restaurants, cargo and communication.

As a whole, Indonesia’s economic growth was projected to be in the range of 6.1% - 6.5% in 2012 to accelerate in the range of 6.3% - 6.7% in 2013. The economic growth level was mainly thanks to high consumption and investment. Meanwhile total forex reserves by end of July 2012 slightly rose compared to end of previous month, i.e. reaching USD 106.6 billion or equal to 5.6 month, i.e. reaching USD 106.6 billion or equal to 5.6 months of import and payment of Government’s debt.

Pressures on Rupiah was increased by high uncertainty of global condition as related to crisis in Europe and recovery of US economy which was still vulnerable and slowdown of China’s economy. On the other hand slowdown of export contributed to pressures on Rupiah. For that matter, BI constantly observed balance in forex market to lead Rupiah movement to be in line with fundamental economy; Rupiah exchange rate value would be in the range of Rp 9.450,- - Rp 9.480,-.

The Capital Market

Meanwhile IHSG would continue their momentum of strengthening until the next time resistance era on August 15, 2012. IHSG would still move positively, as long as the indicator of momentum showed a reverse direction from the point of saturated selling. But it should be borne in mind that there was always a risk of transition trend in the event that price broke through support level of 4,055.

The target of IHSG strengthening this week was in the range of 4.160 – 4.200; IHSG was rolling over their fifth wave so today was the right time to make accumulated buying of chosen shares.

Previously IHSG ended at 4,131.17 after strengthening by 40,4 points or 0.9% during closing session on Thursday (9/8). Index continued to strengthen in tandem with the Asian stochmarket with inflation in China which was low at 1.7% in the last 30 months. Index of JII rose by 1.1%, index of ISSI inched up by 0.8%, index of LQ45 rose by 1.2% and index of IDX 30 rose by 1.3%. Highest strengthening happened to the financial sector 1.7%, followed by the mining sector 1,04%. Meanwhile there was weakening in the plantation sector 0.3%.

Amidst IHSG’s struggle to consolidate this week, some premium shares such as in the financial/banking sector would support index movement. Indonesian banks were reputably skillful in making profit. Data of BI had it, through Semester I-2012 net profit of banks reached Rp 45.73 trillion, growing by 23.26% against June 2011 at Rp 37.1 trillion.

Growth of profit was supported by some factors. Firstly, net income from interest reached Rp 97.73 million, or growing by 16.94%. This increase was in line with credit which reached Rp 2,470.38 trillion, a growth by 25.95%.

Secondly, fee-based income. The banking sector had succeeded to book growth in commission income of 14.31%  to become Rp 67.2 trillion. Thirdly, increased margin and efficiency. Banks had succeeded in lowering Operational Burden over Operational Income (BOPO) to become 74.68%. Compare this against BOPO of the same period last year of 85.9%. Meanwhile the average Net Interest Margin (NIM) increased to 5.38%. Increase of NIM had been happening since April this year. The high profit was in line with the increase of people’s knowledge of technology. The ever improving people’s income means elevated people’s purchasing power. The restriction imposed by the authoring on credit consumption was a positive thing because it minimized the risk of economic overheating but the restriction itself did not reduce consumption, only time was delayed.

So if IHSG phase of consolidation this week in the range of 4,160 – 4,200 was attained, IHSG stood a chance to continue increase unless there was significant fundamental negative sentiment. So far IHSG still had strong resistance because of being supported by high buying spree by foreign investors.

Business News - August 15, 2012          

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