EXTERNAL ADVERSITY CAST SHADOW OVER RUPIAH AND IHSG

The Moneymarket

Rupiah exchange rate value against USD lest Friday (9/11) was predicted to consolidate but weaken. China’s economic data was predicted to prevent further weakening of Rupiah amidst market worries about fiscal cliff in the USA.

The potential of Rupiah consolidation last weekend with tendency to weaken, was among others triggered by market awaiting for result of the Euro Group meeting early this week. Moreover the market had heard announcement of bank interest rate level from the European Central Bank (ECB) and Bank of England (BoE) which were predicted to remain un­changed.

However ECB saw that the economic condition was slightly gloomy as Europe’s economic out look was not so impressive. Therefore Rupiah would consolidate with tendency to weaken in the range of Rp 9,615 – Rp 9,640 per USD.

Rupiah also had negative pressures from data of industry in France which was predicted to weak­en to -0.9% for October 2012 against the previous 1.5%. The same was with production date of Italy which was predicted to be at -1.4% against the previous 1.7%. The only thing was that worries over Europe was balanced by US data which was also nega­tive. Therefore, the market did not see any change in performance of USD and there was not too much negative pressures on Rupiah.

Therefore, from the Council of BI Governors’ meeting (RDG) which stipulated BI rate to hold on at 5.75% did not signal anything except optimism that Indonesia’s economy would grow above 6% in 2012. But data of lessened credit pipelining strengthened worries over Indonesia’s economic slowdown which was happening. Evidently by quarter three of this year Indonesia's economy only grew by 6.17% way below Observers expectations.

Pipelining of credit for September 2012 rose by 22.9% (y o y) but lower than the previous publication of 23.6%. This confirmed Indonesia’s eco­nomic slowdown amidst global economic slowdown. However, Rupiah weakening would be limited thanks to Chine's stabilized economy. During early transac­tions, China’s data would be market’s focus, the fig­ures of which were predictable and positive.

The market had a range of China’s data which was predictably positive, such as inflation by Consumers Price Index (CPI) which was predictably stagnant at 1.9%, inflation by Producer Price Index (PPI) Which was predicted to improve to become -2.7% against the previous -3.6%. The same was with investment data which was predicted to become 20.6% to rise to 20.5%, then industrial production which rose to 9.4% from 9,2% and data of retail sales which was predicted to inch down to 14% from 14.2%. Generally spanking the picture was positive, which confirmed economic stability in China.

China's economic data could have halted fur­ther weakening of Rupiah. But the market did not anticipate any further strengthening on account of Europe’s economic data which was predicted to be negative. At the same time it was sort of difficult to expect a sustainable strengthening of Rupiah. Investors were disheartened by the wide fiscal gap in the US by end of 2012 against global economic performance as a whole as well as the ever gloomy economic air in Europe.

As footnote, Rupiah exchange rate value against USD on Thursday last (8/11) was closed to stagnate at the level of Rp 9,625/Rp 9,635 per USD following Barrack Obama’s victory in the Presiden­tial election Rupiah value inched up by 25 points to the level of Rp 9.600 against previous position at Rp 9,615 per USD.

Barack Obama being re elected as President of the USA made risky markets again be ought after by investors. The general overview over Obama’s vic­tory would support price of bonds considering that his economic policy tend to set interest at low level. However, the present Euphoria was predictably only temporary. The negative sentiment from the moneymarket was still strong.

Rupiah strengthening against USD was some­how still marked by marketplayers’ fear of voting un­derway by Greece’s Parliament of the latest austerity package. Last week the Parliament of Greece planned to conduct voting to axe budget and increase budget which totaled up to Euro 13.6 billion (USD 17.3 billion).

Meanwhile according to Bl’s mid rate Rupiah was strengthening to the level of Rp 9.630 per USD against the previous Rp 9.633 per USD. Previously Rupiah value fell to the level of Rp 9,635. This figure was the lowest level against USD since 2009.

Rupiah exchange rate value against USD once touched the level of Rp 9,570 In early Novem­ber 2009, after further continuously strengthening - Rupiah even reached its highest level of Rp 8,466 in August 2011.

According to BI, Rupiah movement had always been downward on account of unhealthy do­mestic condition: not in terms of economy but in the social political sphere. The anarchic workers demon­strations, meager infra-structure, terrorism, mounting political temperature and hesitant energy policy, all boiled down to market’s negative perception.

Movement of Rupiah exchange rate value had been anomalous against the positive course of Indo­nesia’s economy. The fundamental Indonesia’s econ­omy had been quite impressive, moreover the stock­market. The capital market was stormed by foreign Investors, yet Rupiah was constantly sinking. What were the factors that made Rupiah slump was still a big question.

It seemed that BI still tolerated Rupiah down­turn; this was felt necessary to improve Balance of Payment however it was expected pressures on Rupiah would be reduced because demand for USD might decline toward year end.

Rupiah still stands a chance to reach Rp 9,500 per USD if external sentiment turned better and de­mand for USD subsided. Indonesia’s export which improved lately contributed to performance of Indonesia’s current transaction of the third quarter, which might reduce pressures on Rupiah.

Indonesia’s deficit of current transaction in the third quarter was estimated at USD 5.3 billion (Rp 50.8 trillion), dropping from USD 6.9 billion (Rp 66.2 trillion) of the previous quarter. The estimate was a revision of estimate released last October.

Previously it was estimated that deficit of current transition of the third quarter would be USD 5.7 billion or 2.6% of Indonesia’s GDP. However, thanks to trade surplus in July and September, it was estimated that deficit of current transaction was only 2.4% of GDP or USD 5.3 billion. By the above picture, for this week Rupiah course was predicted to move flat in the range Rp 9,610 – Rp 9,640 per USD.

The Capital Market

Index of IHSG weakened by 22 points amidst falling stockmarkets in Asia. Negative sentiment came from the global stockmarket which had been earlier corrected quite deeply.

During morning session last Friday (9/11), IHSG dropped by 52.922 points (1.22%) to the level of 4,297.502 due to negative sentiment of the Global market. There was high selling spree of premium shares. Asian stockmarkets were falling in the red zone. As Barrack Obama was re-elected as President, now investors were in deep anxiety of budget up jump in the USA and economic crisis in Uni Europe.

Previously on Thursday (8/11) IHSG weakened by 22.556 points (0.52%) to the level of 4,327,868. Meanwhile index of LQ45 dropped by 4.382 points (0.58%) to the level of 746.627. Pressures to sell was strong due to sentiments of the global market. Not all of the sectoral index could weaken, one sector managed to strengthen by end of session, i.e. index of the various Industry sector.

Asian stockmarket were sinking deep dur­ing closing Mission today. Negative sentiments of the global market kept suppressing so the correction was on the average more than one percent. Index of com­posite Shanghai fell by 34.22 points (1.63%) to the level of 2,071.51 Index of Hang Seng nosed down by 532.94 points (2.41%) to the level of 21.565.91. In­dex of Nikkei 225 dropped to 135.74 Points (1.51%) to the level of 135.74 points (1.51%) to the level of 8.837.15 Index of Straits Times sank by 35.26 points (1.16%) to the level of 3.008.01.

Weakening of regional stockmarket and IHSG was due to investors’ attention of Fiscal Cliff in the USA. Economic data of Asia, Australia and Europe also posed as weakening sentiment of index. Import export data of Germany weakened by 2.5% and 1.6% respectively (consensus 1.5% and 0.1%) and European Commission estimated export of Germany would still slump by next year.

Fiscal Cliff was still the catalyst of stockmarket weakening at Wall Street. The majority of US Stockmarket was closed to weaken by the sentiment of Fiscal Cliff where investors were anxious because no consensus had been arrived at about slashing of expenditures and tax increase of USD 600 billion at the Congress effective as per January 2013 which would halt economic slowdown even slower.

Apparently Wall Street fell on the second day of post-Presidential election period. The big selling spree axed shares by mare than one percent. The weakening that occurred meant correction of 313 points on the previous index; the deepest daily downturn that happened this year and the deepest correc­tion just one day after Barrack Obama was re-elected as President or the USA.

Some brokers stated that Wall Street which had been idolizing Mitt Romney, finally over acted when Barrack Obama was re-elected. Now the same was being done when they had to face deficit prob­lem and fiscal cliff (slashing of budget and increasing taxes) Big selling spree made index of main stock­merkets fell by more than 2% in two days. During closing session last Thursday (08/11) index of Dow Jones slipped by 120.95 points (0.94%) to the level of 12,811.78 Index of S&P 500 dropped by 16.99 points (1.22%) to the level of 1,377.54 while index of composite Nasdaq fell by 41.71 paints (1 .42%) to the level of 2,895.58.

Shares of the technological and financial sectors posted biggest down turn in S&P index amounting to 4.2%. Shares of Big capitalization like Apple Inc dropped by 3.6%, shares of Mc Donald weakened by 2% after reporting for the first time sales downturn at global scale since March 2003 while Pru­dential Fin Inc weakened by 4.8%.

In fact US economic date was satisfactorily good when Jobless Claim was having downturn by 8,000 people to become 355.000 people. However, beside the negative sentiment of Fiscal Cliff, news from Greece posed as catalyst of stockmarket slump in the USA and Europe. Most probably European Union Master would suspend decision for bail out fund till end of this month.

Investors’ anxiety today was more about fis­cal gap in the USA in 2013. Fiscal Cliff was a package of tax increase and slashing of expenditure worth USD 600 billion which would be effective as per Jan­uary 1, 2013. Unless stipulated before January, this policy could injure US economy and the world. It was expected that the new US Government could drive the US congress to arrive at an agreement which would neutralize the crash.

Other negative sentiment which would sup­press index was slashing of economic growth pro­jection by the Europe Commission to become 0.1% in 2013. The projection was lower than the previous estimate, i.e. growth of 1%. Meanwhile for 2012, economy of that region was estimated to have dawn-turn of 0.4%. This had the impact on various stock-markets in Europe which also posted Slump.

Pressures from the weakening US stockmar­ket would burden the regional stockmarket. By sentiment of the external factor, on the last day of do­mestic stockmarket transactions the previous week (11/9) stockmarket index was predicted to he once more fluctuative with the tendency to weaken in the range of 4,300 – 4,330 understandable because on Thursday (8/1) index was closed in tile red zone, corrected by 22.56 points or equal to 0.52% to the level of 4,327.86.

At the Security Exchange Market (BEI) amidst all sectors having growth, the minery sector was having contraction of -0.09%. The Central Statistics Bu­reau (BPS) noted some reasons which explained why only this sector was having contraction in quarter III this year. One of the reasons of contraction in the mining industry was because there was no discovery of new oil well in Indonesia which wile on account of overlapping in lend utility and difficult procedures in application for opening new mines.

Besides there were some technical problems like oil fields in Riau and reservoir problem in East Kalimantan. Other problems were aging tool and equipments end limited excavation. The unenergetic minery sector was duo to long and winding economic crisis which had its impact oversees demand.

One thing was sure as long as Indonesia’s economy was still growing, the banking sector would score positive performance. From the Viewpoint of in­vestors who were long-term oriented, shares of the banking sector would bring positive impact. Performance of shares of the financial and banking sectors in the stockmarket was positive enough as reflected in the IHSG.

Prospect of the banking industry at home would also be positive as BI planned to oblige foreign banks to set up companies based on Indonesian law, or In the form of company. To offer the option of Initial Public Offering (IPO) to foreign banks, the stockmarket authority would firstly evaluate the prospect as soon as BI realized their plan into a regulation.

There was enough room for national banks to expansion so it would encourage them to seek for income from other sources for the sake of net profit growth so the shares could be liquidated at the capital market. One of the opportunities was to increase fee based income so the banking business could grow by 14% in 2013.

Stakeholders of the banking industry rated that shares of the banking industry were still the first choice. They predicted that shares of the bank­ing industry promised higher return compared to that of other sectors. In the past five years, return of the banking sector outperformed growth of IHSG stock­market. Many securities exchange managing investor’s fund were still considering shares of the banking sector as one of the most noteworthy potential.

Hence for this week movement of IHSG would be in the range of 4,310 - 4,440 with the tendency to strengthen but reserved. Beside the banking sector second liner shares and IPO Shores were predicted to be sought after by foreign investors an simultaneously serve as catalyst of index strengthening. 

Business New - November 14, 2012