Sunday, 11 November 2012


The Moneymarket
In Spite of the continuous depreciation of Rupiah against USD, Bank Indonesia as monetary authority rated such was something natural. BI had their commitment to always remain in the foreign currency market in order to stabilize, because the market must be balanced with inflow of foreign capital through investments. The amount of USD in circulation was still in accordance with market demand and the underlying economic condition.

So far the average exchange rate value of Rupiah against USD was Rp 9,270 BI would maintain Rupiah exchange rate value to keep it from fluctuating too much. Based on BI’s mid-rate (6/9) Rupiah was seen to weaken to Rp 9,592 against the previous Rp 9,588 per USD.

Generally speaking market players were today observing the development of potential deficit of Indonesia’s current transaction as reference in doing transaction. If the threat could be anticipated, most likely investor’s perception would be positive and inject positive sentiment on Rupiah.

Marketplayers were also observing economic growth for the future. It was expected that investment and export could contribute to the pursuit of economic growth 2013 at 6.8%. But BI was pessimistic that economic growth could be lifted any higher because the global economic condition today was still signified by lessened demand in Europe. As BI saw that export was still recovered, they projected Indonesia’s economic growth in 2013 would only be 6.3% - 6.7% amidst optimism of a better global economic prospect.

Somehow BI’s projection was different from Government’s assumption in RAPBN State Budget 2013 of 6.8% due to difference in time calculation based on the latest economic condition. It was expected on the latest economic condition. It was expected that the difference of assumption of macro assumptions between BI and that of the Government would not ignite and debate among marketplayers as it might result in varied economy.

It was noteworthy that Euro the common currency once elevated by 3% of the highest level in two months against USD after the President of Euro Central Bank Mario Dhargi announced to buy bonds. 17 Euro zone member states maintained margin level against most of the 16 world currencies amidst ECB’s optimism that ECB would announce measures to be taken to overcome debt crisis.

Meanwhile Australian USD was exchanged at it lowest value level in more than 7 weeks before release of report which showed increasing unemployment in August. The market responded positively to ECB signal who planned to take significant measures. At least Euro would settle at the present level or perhaps to inch up toward conducting of ECB meeting.

The market was quite shocked to hear announcement of the Central Board of Statistics (BPS) about the increases prices of air transportation, tofu, and tempe which triggered inflation in the month of August 2012 to the point of 0.95%. According to BPS the main uplifted of consumers price index (IHK) in August was increased prices of transportation and seasonal food during the fasting month, Lebaran and new school semester year. The greatest contributor to inflation in August was food (0.35%) and transportation, communication followed by financial services (0.23%).

The only thing was BPS did not worry about inflation level of last August which was rated as relatively controllable because it was only Slightly higher than inflation of August 2011 which was 0.93% based on inflation data of August, inflation of 2012 would not each 5% because inflation rate in the ensuing month would be lower.

High import contributed to downpressing of price at consumers’ level, especially due to up jump of import from countries who treated Indonesia as an alternative export destination country like China. Inflation of 2012 was projected to be only around 4.7% - 4.9% so BI rate was predicted to settle at 5.75% till end of year.

The market would also respond positively to the development of Indonesia’s forex reserves by end of last August which reached USD 109 billion. The figure was an increase of around USD 2.45 billion against that of end of July at USD 106.55 billion. Increase of forex reserves was thanks to income from export especially oil an gas.

In addition to the above, increase of forex reserves also originated from term deposit of foreign currency and good sales of auction of Government bonds. Once Indonesia posted highest forex reserves of USD 114.93 billion, but simultaneous with deficit of balance of payment in quarter II, the position slumped. Downturn of forex reserves was also the monetary cost of Government’s effort to protect Rupiah exchange rate value which once crumbled.

It seemed reasonable that BI projected Rupiah value against USD till end of 2012 to be in the range of Rp 9.200 – Rp 9.400 per USD. Among the reasons was that during the second half of 2012, deficit of current transaction would contract to only around 2% of GDP. This estimate was based on the expectation that the global economic condition and price of export commodity would be better, while being supported by the BI’s policy and the Government.

The subsiding restlessness of the global economy would pull inflow of foreign capital higher which would eventually lift up surplus of capital and financial balance. In 2013 the prospect of Rupiah value would still be influenced by the prospect of global economy. Performance of current transaction was predictably better with support of export performance although import was still high due to high domestic demand.

Inflow of foreign capital especially foreign direct investment (FDI) was expected to increase to sustain surplus of capital and financial balance sheet. Based on performance of balance of payment, BI projected Rupiah exchange rate value in 2013 would be in the range of Rp 9,300 – Rp 9,500 per USD.       

The prediction must be accompanied by caution, including of the prolonged crisis in Europe and economic slowdown in some partner states which might affect export performance. As for this week, Rupiah exchange rate value was predicted to move in the range of Rp 9,565 – Rp 9,615 per USD with a tendency to inch up.

The Capital Market

During closing session last Thursday (6/9), index of IHSG strengthened by 27.505 points or 0.67% to the level of 4,084,836 cheered by the Asian stockmarket. During closing of session 1, IHSG strengthened by 14.770 points (0.36%) to the level of 4,090.122 Meanwhile index of LQ45 rose by 3.393 points (0.49%) to the level of 701.174 Increase of this index of ECB meeting in troubleshooting debt crisis.

And yet during the last session on Monday early last week (3/9) IHSG was closed to rise by 57.617 points (1.42%) to the level of 4,177,948 Meanwhile index of LQ rose by 11.201 points to the level of 706.733 Strengthening of IHSG was driven by buying spree of shares which were cheap. Index managed to break through the psychological level of 4,100.

Again foreign investors were accumulating shares. Local investors were not less passionate to chase shares which were already cheap. Nine shares managed to strengthen, being driven by the buying spree; only one sector was still under pressure, i.e. agriculture the consumer’s sector took the lead in the strengthening process.

In other part of the world, (6/9) shares in Wall street were going by leaps and bound, breaking through the highest level since the fall of Lehman Brothers which ignited the crisis of 2008. The strengthening was triggered by the plan to but promissory notes in Europe by the European Central Bank (ECB).

The President of ECB Mario Draghi had kept his promise of last July to do anything he could to troubleshoot debt crisis in Europe. The Europe Central Bank intended to buy bonds without limit in order to save crisis-entangled European states.

This ECB plan, which was not approved by Brundesbank from Germany planned to buy promissory notes and keep them for a period of three years, naturally by mandate of ECB. ECB also planned to maintain interest level at lowest level of 0.75% to tame inflation as well as to ease credit cost.

Index of Dow Jones jumped up by 244.52 points (1.87%) to the level of 13.292.00 Index of Standard & Poor’s 500 jumped to the level of 1.432.12, the highest position since May 2008, before the global financial crisis swept the earth. Index of Composite Nasdaq skyrocketed by 65.12 points (2.12%) to the level of 8,134.39.

The upjump of index of Dow Jones was triggered by the plan to buy promissory notes in European states by ECB and positive sentiment from data of America’s economy which exceeded expectations, i.e. in the service sector and number of employments.

Movement of index at the global and local stockmarket in the last few months were much influenced by news from Europe. Responding to this, index of S&P had risen by 8% since early July. Meanwhile Asian stockmarkets were open to rise and indicated that index serving as regional reference would book the biggest increase in the past one month.

Bloomberg reported that upturn of the regional shares was in line with ECB’s decision to give room to unlimited bond buying. According to analysts, bond buying plan by ECB was a long term measure to find solution to crisis. The plan was rated as having the potential to minimize continued risk in Europe. They stressed there was no dount about it.

Nearly all stock markets in Asia were already opened last Friday (7/9) after the US stockmarket was closed to be appreciated. Nikkei 225 in Japan rose by 1.89% to the level of 8,844,57; index of Tai-ex in Taiwan rose by by 1.32% to the level of 7,423.19. Index of Kospi at the South Korea stockmarket jumped by 2.13% to the level of 1.921.23. Index of S&P/ASZ at the Australian stockmarket inched up by 0.57% to the level of 4,337.5. Index of Straits Times in Singapore also inched up by 0.87% to the level of 3,015.4. Not less notable FTSE KLCI in Malaysia inch up by 0.16% to 1,620.62. Furthermore index of NZX in New Zealand also rose by 1.19% to the level of 3,737.4.

From the above picture it was visible that Indonesia’s macro-economy which tend to weaken would not shatter investor’s perception since they were focusing attention more on the process of economic recovery in Europe. It seems quite natural if the BEI index was projected to move in the range of 4,090 – 4,130 with the tendency of limited strengthening. Shares of the financial sector, consumers sector and construction was predicted to serve as sustainer of IHSG increase.        

 Business News - September 12, 2012

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