Tuesday, 14 May 2013


The Moneymarket

The issue of fiscal cliff in the USA was predicted still to be the focus of attention of the global moneymarket. Today Barrack Obama administration was challenged to revitalize the state budget whereby to safeguard continuity of US economic development.

The Fiscal Cliff solution would rely on two instruments. Firstly, the US Government would axe routine expenses especially for defense purposes. Secondly, in parallel with that the Obama Government would increase taxes on the rich group in the USA. Those were citizens with income above USD 250,000 per annum. Data had it that 2% of America’s population belonged to this wealthy group.

Assuming talks over the fiscal cliff ran smoothly which was due in early 2013, the prospect of economic recovery in the USA would be clear. The positive impact would spread out to all trading sectors in the USA. The financial sector would also be energized as market trust increased.

Demand for property and automotive in the USA would soar up. Unemployment figure would drop to the expected level, i.e. 7%. Manufacturing index would exceed the safe level of 50. In the end economic activity would be more dynamic.

America’s trading partner, especially Indonesia would share the cream of success where Rupiah value would arrive at a new equilibrium. Export demand from America would increase. Inflow of foreign capital would be heavier. There was ray of hope that world’s economic recovery would come sooner.

Rupiah exchange rate value against rate value against USD at the inter-bank spot market Jakarta last Wednesday (28/11) was closed to thin out by 5 points (0.051%) to the position of Rp 9,615/Rp 9,610.615. Weakening of Rupiah today was still determined by market’s fear over the condition in Europe. Soon as the euphoria about bailout for Greece was over, Greece had been confirmed about their getting bailout which was scheduled to liquidate on December 13, 2012. However the latest development in Germany signaled some obstacles as the German Parliament discussed the latest bailout scheme for Greece.

Therefore, over the sessions Rupiah reached its lower level of Rp 9,620 after momentary strengthening to Rp 9,595 against the opening level of Rp 9,600 per USD. There was report that the German Parliament would conduct voting for bailout for Greece on Friday last week but the last comment by one of Germany’s house members of the Steinbroejk opposition party was that the voting would be postponed. Germany still needed time to dissect the bailout schemed up by finance minister of the Euro zone.

The market feared that Germany might not execute what was being agreed upon at the Euro Group meeting yesterday with numerous points. Supposedly the voting would be postponed until all information on rescuing Greece ware completed. Besides, most probably transfer of profit from Greece bonds obtained by the European Central Bank (ECB) for the Athens administration was questioned by the German’s Central Bank.

The Deutsche Bundes bank claimed that they were more rightful over the profit obtained from the Greece bonds. Therefore, transfer of bond-based profit to Greece would pose an object of dispute in the future.

At the same time Rupiah was also getting negative sentiment from the report-on-inflation of the Bank of England (BoE) which was quite strong because the BOE was still expressing their worries over economic contraction in England although data of the latest GDP showed it was still growing by 1% for quarter III-2012.

This was not to mention remark made by one of the Fed’s executive who protested extension of Operation Twist which ended in December 2012. Besides opposition to increased purchase of mortgage-based bonds known as the third quantitative easing (QE-3) all in all it was negative sentiment for Rupiah.

Moreover economic data released by the US Government was reasonably positive, such as the Index of house price, consumers confidence index and manufacturing index. This confirmed performance of USD against other currencies which posed as pressures on Rupiah. All in all Rupiah inched down amidst value of USD which remained stationary against other main currencies but strengthening against Euro.

For this week, with better sentiment there was opportunity for Rupiah to strengthen to around Rp 9,580-Rp 9,620 per USD amidst Indonesia’s well-managed economy.

The Capital Market

The same hope was pinned on the performance of IHSG stocmarket, which was expected to pass the crucial point. After momentary slump to below the psychologic level of 45,300 finally IHSG settled at the level of 4,304.84. Meaning last Wednesday (28/11) index only weakened by 32.69 points (0.75%) against previous closing session.

This was most surprising; the point was that this deep sinking happened at the time when Uni Europe’s Finance Minister and the International Monetary Fund (IMF) agreed on Greece’s bailout fund amounting to Euro 44 billion. According to Olli Rheine, Monetary and Economic Commissioner of Uni Europe Greece would receive the bail out fund on December 13, 2012. Thankfully this good news would bring better future for Greece and Europe.

However it was not enough to console stockmarketplayers, while creditors agreed to axe credit interest rate and delay debt’s due date to 10 - 15 years. What was more heartening was that the Minister of Finance of Uni Europe had promised to extend Euro 240 billion Euro. Of that amount so far Greece had benefited bail out fund of Euro 150 billion.

Supposedly according to John Veter, the good news from Greece had its positive impact on IHSG. And why was it so hard for IHSG to consolidate? One thing was sure that downturn of indices was also happening in some other money markets of the world. In Wall Street, index of Dow Jones (DJIA) and Nasdaq both inched down by 0.69% and 0.30%.

Not just in America, downturn of index was also happening in shares of some Asian stockmarkets. Index of Hang Seng for instance, inched down by 0.62%. Weakening was also happening to Kospi (0.65%), Nikkei (1.22%) and Straits Times (0.09%) The turbulence in many stockmarkets probably accounted for weakness of IHSG.

It seemed that decline of some stocmarkets of the world was related to a series of occurrence happening in America. Last week Ben Bernanke, Governor of the Fed delivered his message about the fiscal cliff in the USA. Besides, in the near future there would be release on consumer confidence. While waiting for good news from America, investors from some stockmarkets were on a selling spree.

Some people believed Bernanke planned to announce stimulus of quantitative easing of fourth edition to inject more steam to America’s feeble economy as result of tax increase and austerity plan of President Barrack Obama, however some people regarded Bernanke as a person of high discipline and prudence.

The different opinions would certainly bring their own consequences. If Bernanke’s statement and release of consumer’s confidence in America were positive, IHSG was predicted to soar up. In the reserve case prices of shares would slump because the fiscal cliff policy, which was Obama’s invention, would drive America back to recession cliff.

If Bernanke was sure to execute the phase IV of quantitative easing it was time for investors to shop around because index would move in the range of 4,300 - 4,400 this week. Admittedly US stockmarket moved down during transaction on Wednesday (28/11) as investors were still worried about difficult negotiations over the fiscal cliff.

Investors stormed by the hordes to secure a safe position. Investors were responding to the statement of house members about the title progress in the effort to avoid the fiscal cliff. America was under the threat of recession with the increase of tax and budget saving as per January 1, 2013. The market was also anxiously waiting for data of house sales for October.

Some economists were expecting increase like last September. The market was also observing news about the Fed who would release Beige Book about the condition of regional economy. The release was expected to induce growth in spite of the Sandy hurricane.

Broadly speaking the threat of fiscal cliff would trouble the global stockmarkets. Europe’s stockmarkets inched down by 0.4%. Asia’s stockmarket was marked with downturn like index of Nikkei and Shanghai which continued to slip down. Index of Nikkei hit the lowest level in the past 4 years.

Back to BEI, apparently IHSG had risen by around 14.5% by year-to-sate up to November 26, 1012 last. Compared to other Asian stockmarkets, IHSG’s performance was in the fourth best position. Somehow the position slumped against that of early 2012.

In early 2012 last, Indonesia’s stockmarket was still in second position. Today IHSG was still below Thailand as champion of regional stockmarket with increase of 28.5%. Meanwhile India’s stockmarket flashed by 20% while index of Hong Kong, Hangseng rose by 18.6%.

With listed members numbering 460 this November, stock regulators were expecting increase of domestic contribution. Hence in case of turbulence in the capital market and global redemption, IHSG had the strength to keep from sinking too deeply or collapse so national economy would not be shaken. Stock market authorities were not too expectant that domestic investors would dominate ownership of shares.

Sector-wise, shares of the banking sector, consumer’s goods, construction and transportation would be the target of investors over the week. Banking and fiscal policy which was prudent would serve as catalyst for safeguarding IHSG in the range of 4,330 - 4,380 this week.

Business News - December 5, 2012

No comments: