The analytic headline of early this week as written above was not without intention. Considering the heavy pressures of increased import and declining export, Bank Indonesia felt it necessary to lower Rupiah exchange rate value to a certain level. The intention was to put brakes on import and to jack up export. Meanwhile the stockmarket was showing signals of invigorating in line with the release of eminent report of the third phase which was to terminate on September 30 last.
At least Bank Indonesia’s objectives was met when last Thursday [4/10] triggered by investors’ selling spree Rupiah was sold at inter-bank transactions to strengthen by 10 point to the level of Rp 9,595 against the previous position USD 9,605 per USD. Even technically USD value which was high enough stimulated selling action of USD enable Rupiah to strengthen.
Moreover Europe’s Central Bank would run a meeting might lead the way to stimulating including to axe bank interest which would lead to risky exchange rate value. At home in Indonesia forex reserves was considerably high, i.e. USD 110. 172 billion as per September 28, 2012 which might lead BI to adopt more policies to protect Rupiah exchange rate value against USD?
The potential of Rupiah strengthening was notably great, because a forex reserve was plentiful. Till end of this year, moderately rupiah was predicted to float at the level of Rp 9,450 per USD. Meanwhile trade balance which had been noted as deficit in the past four months was gaining energy and started to score surplus of USD 246.5 million.
One thing notable was Rupiah inching up sluggishly due to monotonous trading atmosphere and no notable outburst at home. In the external, Australian Dollar once slumped in line with the slump of retail sales, although it managed to bounch back on short term trading on Australian dollar and this caused Rupiah to move flat.
On the other hand people were waiting for the meeting of financial ministries of Uni Europe this week, but many people were not over expectant of the condition of Europe because the conflict was greater than the effort to find solution. Dissenting opinion arose between German Central Bank; the topic of debate was whether the European Stability Mechanism [ESM] was legal or illegal and yet Germany’s Kanselir had signed it.
Meanwhile in terms of US data, although it did not show any significant growth, stability was felt at the lower level. Only thing was that even at the low level the US economy was not sinking.. apparently Initial Jobless Claims was predicted to worsen to become 359 thousand against the previous 370 thousand; meaning more people claimed to be jobless.
Theoretically, in the short term, the negative data strengthened USD value, because America is the world’s economic locomotive. If the locomotive broke down, the whole world’ economy break down. Of two evils choose the less, and USD is the best of the worst.
All in all, USD was stable against most of the leading currencies especially against Euro at 79.760 But later on USD weakened against Euro to the level of USD 1.2940 against the previous USD 1.2905 per Euro.
At home in Indonesia, BI would take several measures to reduce deficit in current transaction by allowing some room for weakening of Rupiah but measurably. With Rupiah depreciation, import was controllable while export was more or less assisted. However, BI would still maks sure that Rupiah remained stable and not restless.
Beside the above steps, BI continued to step up monetary interventions to ensure Rupiah stability and controlling liquidity. BI was expecting that their action was not interpreted as tight money policy, because BI benchmark rate was maintained to stay at 5.75%, the monetary corridor at the lower level being narrowed down by increasing deposit facility by 25 bps from 3.75% to 4,00%.
Other policies were to enhance deepening of the foreign currency market to support rupiah stabilization by relaxing tenure forward of non residence from the previous minimum 3 months to become minimum one week. All the policies were meant to enable investors to do hedging of their investments in Indonesia. BI was also planning to take follow up steps in regard to Export Yield Forex [DHE] including development of Trustee functions in the banking sector.
In addition to the above, BI adopted the macro-prudential policy to manage credit development and keep it from excessive growth especially for the automotive, property and credit card center. BI would also take steps to strengthen implementation of the Loan-to Value [LTV] policy including enhancement of Syariah-based industry and prohibition of Credit without-guarantee [KTA] for credit down payment.
Beside the monetary policy, BI also coordinated with the Government to take measures in controlling deficit in current transaction as known, deficit in Indonesia’s Current Transaction [NPI] until Quarter II 2012 swelled from USD 3.2 billion [1.5% of GDP] in quarter I to USD 6.9 million [3.1% of GDP].
It was noteworthy that the Board of Statistics [BPS] noted inflation in September 2012 to be only 0.01% as prices were descending. The greatest contributor to inflation was garment group which reached 1.47% and also education, recreation and sports 1.07%. Meanwhile food was the greatest contributor to deflation, i.e. -0.9% followed by transportation, services and the financial sector -0.8%. the food category was still satisfactory and therefore contributive to deflation.
Therefore, inflation rate of calendar year January-September 2011 was noted at 3.7% and year-on-year inflation was 4.31%. inflation of core inflation y.o.y 4.12%. Meanwhile records of 66 cities were having deflation. Pangkal Pinang posted highest inflation i.e. 0.47% followed by Padang 0.54% and Dumai 0.01%
Meanwhile the city posting highest inflation was Singkawang -2.18% and Palu -2%. Inflation in September 2012 was the lowest in the same month was posted at 0.8%, in September 2009 reached 1.65%. Meanwhile in September 2010 inflation reached 0.44% and in September 2011 0.27%.
On the other hand Indonesia’s export in August 2012 reached USD 14.12 billion or down by 12.27% compared to export in July 2012 amounting to USD 16.09 billion. Meanwhile compared to August 2011 down to 24.30%. downturn of export in August 2012 happened in the oil-gas dropped by 2.3% from USD 2.92 billion to USD 2.85 billion. Meanwhile export of non oil-gas dropped by 14.49% from USD 13.17 billion to come USD 11.26 billion.
Downturn in oil-gas export was due to slump of export by 38.12% to become USD 220.5 million and export of gas which dropped by 3.19% to become USD 1.66 billion. Meanwhile downturn of non pil-gas export through August 2012 was triggered by downturn of prices of fat and animal/vegetable oil amounting to USD 1.59 billion, followed by downturn in prices of rubber and rubber goods from USD 892 million to become USD 795 million.
Accumulatively through January – August 2012, Indonesia’s export value was also having downturn of 5.58% from USD 134.68 billion to become only USD 127.17 billion. Over the first 8 months of 2012, export value was still dominated by mineral fuel which reached USD 17.83 billion, followed by fat and animal/vegetable oil USD 14.09 billion.
In spite of downturn in export, particularly non oil-gas products due to crisis in Europe, demand for textile commodities remained high, especially in the USA. Other export commodities which were high and remained high were rubber and rubber products.
Based on destination country, accumulatively through January – August Indonesia’s export of non oil gas products were for the most part still to China which reached USD 13.37 billion. Total market share of non oil products to the three countries came to 35.42% of total national exports amounted to USD 101.213 billion.
Meanwhile export of non oil-gas products to ASEAN states came to USD 25.6 billion, contributing around 25% of non oil-gas exports. Export were mainly addressed to three countries: Singapore, Malaysia and Thailand. Meanwhile export of non oil – gas products to Uni Europe were mostly to Germany which reached USD 2.08 billion, followed by England USD 1.16 billion and France USD 774 million.
On the other hand, the Central Board of Statistics [BPS] noted Indonesia’s export on August 2012 reached USD 13.87 billion or down by 15.21% against import of July 2012 amounting to USD 16.35 billion.
Although import of oil gas was increasing by 19.97% due to increased in import of crude oil and oil-products, downturn of non oil-gas import brought total import to low level compared to previous period. Because of import downturn in August 2012, for the first time in the past 3 months Indonesia was posting trade surplus.
The downturn of import came as a surprise, especially import of raw materials and auxiliary materials. In the near future, a chance of import down turning was still open but to what degree the downturn was still a question.
In August 2012 last, trade balance posted surplus of USD 248.5 million accumulatively of January – August 2012 reaching USD 496.7 million. In August 2012 Indonesia’s export was posted at 14.2 billion and import USD 13.87 billion which resulted in surplus of around USD 248.5 million. Accumulatively through January - August 2012 Indonesia’s export value reached USD 127.27 billion while import was posted at USD 126.62 billion, resulting in surplus of USD 496.7 million. By the above picture, Rupiah was predicted to fluctuate in the range of Rp 9,569 - Rp 9,600 as an “ideal” range.
The Capital Market
Last Thursday [4/10] index of IHSG ascended again to break its highest record in history at the position of 4,271. Again investors go for shares which pushed index up. Buying by investors was still limited since the condition in the Euro zone was still unclear. Whether Spain would call out for bail out or not was still unclear.
One thing was sure IHSG strengthened by 19,950 points or 0.47% to become 4,271,461. Meanwhile index of LQ45 rose by 5.727 points or 0.78% to become 736.370. Nearly all sectors strengthened except agriculture, minery, infra structure and trading. Foreign investors were making clean net buy of Rp 315.18 billion. Total transaction was posted at Rp 4.13 trillion.
Meanwhile Asian stockmarkets were closing trading the varied way. The stockmarket in China was still on vacation in line with public holiday. Index of Hang Seng inched up by 19.67 points or 0.09% to become 20,907.95. Index of Nikkei Strengthened by 77.72 points or 0.89% to become 8,824.59. Index of KOSPI slumped by 3.35 points or 0.17% to the level of 1,992.68.
Index of IHSG failed to surpass the highest record of 4,272 last September. The highest level reached was 4,275 and the lowest was 4,248,51 Shares of the industrial sector was still sustainer of index strengthening, rising by 4.04% followed by shares of manufacturing sector 1.6%. Meanwhile shares of the mining sector took the lead in weakening by 0.6%; generally speaking shares of the commodity sector were still under pressure. On the over all, shares of the construction, cement, property and automotive sectors were showing potential of significant growth. What was needed now was extra energy from the banking and consumers sectors to lead IHSG to attain target of 4,400 – 4,800.
Soon when the resistance level of IHSG at 4,272 could be broken through IHSG might be expected to soar up to 4,400 – 4,800 or at least 4,300 – 4,350. The local stock market stand a change to strengthen, being stimulated by positive regional sentiment. Broadly speaking, index was still in the span of consolidation so the range of movement was still limited as there was no signal of being bullish. Shares of the construction and consumers sectors were expected to move on the green lane.
Previously the US stockmarkets was closed positive, being supported by economic data which was better than expected however anxiety over weakening of global economy was still an obstacle to index increase. Index of Dow Jones rose by 12.25 points or 0.09%, index of S&P 500 inched up by 0.36% while Nasdaq rose by 0.49%. The Europe stockmarket was closed in diversity after Spain’s prime Minister denied he would plead for bail out. Index of FTSE inched up by 0.28%, index of CAC slumped by 0.24% while index of DAX inched up by 0.22%.
This week, positive sentiment from US economic data would bring positive impact on IHSG. Release of the US employment data, as expected would make the US stockmarket again to rebound and generate positive impact on IHSG. The rebound of crude palm oil was predicted to make shares of the sector to have “technical rebound” after weakening significantly.
Business News - October 10, 2012