Monday, 8 July 2013


Marketplayers were today waiting for Government’s policy in regard to the plan to increase price of subsidized oil. The discourse in circulation was that price of Premium benzene would be set at Rp 6, 000 per litre, while solar would be Rp 5, 000 per litre.

So far there had been no certainty of the size of increase and timing. This was the point where marketplayers were anxiously waiting for the Government’s policy to lift subsidy for oil. The sooner the decision was made, the faster the market would response positively.

Uncertainty had cornered Rupiah which was constantly under pressure. Meanwhile the development of stockmarket was notably under control because index of IHSG was still settled at above 5, 000 until May or at least through the week; the issue of Government decision was still the marketplayers’ focus of attention.

The Moneymarket

Rupiah exchange rate at the interbank spot market Jakarta last Friday [24/5] was predicted to weaken in line with bettered data of US unemployment claim. Just a day before [23/5] America released unemployment claim which was predictably getting better. This condition enhanced speculations of reduced stimulus by the Fed by way of bonds buying.

The figure was predicted to resume to 345 thousand against the previous 360 thousand. If reversed, it would ease speculations so Rupiah weakening would be limited. However, last week end Rupiah was under pressure at Rp9, 790 – Rp9, 810 per USD as Rupiah strengthening was limited in the range of Rp9, 700 – Rp9, 750 per USD.

In reality, unemployment claim in the USA which was supposed to end by May 18 2013 last disclosed the figure of 340 thousand, or lessening by 23 thousand which was revised to 363 thousand. Over four weeks the average was 339, 500 or lessened by 500 of average of the previous week which was revised to 340 thousand. This data strengthened USD and on the contrary suppressed Rupiah.

The only thing was the Government’s plan to increase price of subsidized oil, if it were increased would better sentiment for Rupiah. There was statement of BI high official urging the Government to instantly increase oil price by 44% or Rp2, 000 per litre, which would harden sentiment of Rupiah weakening. With increased oil price, budgeting could be more balanced so the sentiment for Rupiah would be positive.

As footnote, Rupiah exchange rate value against USD at the interbank spot market during transaction on Thursday [23/5] was closed to weaken by 6 points [06.06%] to the position of Rp9, 770 per USD. This week there was a change for Rupiah to strengthen in the range of Rp9, 760 – Rp9, 800 per USD with tendency to inch up.

As known, BI had released reference for spot market price of USD against Rupiah which was credible to support efficient price formation at the market known as Jakarta Interbank Spot Dollar Rate [JISDOR] which was spot market price of USD/IDR formed on the basis interbank forex transaction the data of which was obtained by real time through Forex Transaction Monitoring System against Rupiah [SISMONTAVAR] at BI.

According to BI in the effort of supporting market in-dept probing of the domestic forex market, an accurate USD/IDR spot price was necessary which reflected market price. Previously, information of USD/IDR rate was only available on the basis of bank’s quotation which was buying or selling initiative offered by bank without certainty to be realized in transaction. As it was not based on actual transaction, price quotation might show inaccurate price information or even creating a-simetric information which in the end would cause improper price formation in the market.

JISDOR was formed on the basis of average weight volume of all inter-bank transactions of USD/IDR between 08.00 – 09.45 AM and announced at 10.00 AM West Indonesia Time in BI’s Website. The data would be available at every business hours not including Saturday, Sunday and National holidays or other days stipulated as holiday. This reference exchange rate was not mandatory but was able to give credible information as benchmark for the money market in making transactions. In addition to that this reference rate served as monitoring instrument and assessment for BI in forming the forex market that it may develop the healthy way and had stronger resistance against market turbulence.

Consequently banks were obliged to refer to the exchange rate of JISDOR in the Contract Agreement of forex exchange rate value referring to benchmark, although there was no firm sanction imposed on rule-breaking banks. This was because the reference course of JISDOR could reflect the actual condition of forex market because it was formed on the basis of average balance of interbank transactions.

Jisdor had underlying legal base, i.e. BI’s Circular Letter no 15/19/DPM released on May 15 2013 and launced last Monday [20/5] JISDOR was formed on the basis of average weighed of the entire interbank transaction volume of USD/IDR between 08.00AM – 09.45AM and announced at 10.00AM West Indonesia Time.

In the Circular Letter it was stipulated that banks were obliged to refer to JISDOR in forex transactions using benchmarks. This obligation was effective expect for forex exchanges underway. Forex transaction contracts included derivatives like SWAP and Forward.

Somehow the Central Bank would not put hard sanction on banks that did not refer to JISDOR in forex transactions. The sanction would only be internal communication between BI and banks. The banking circles themselves responded positively to BI’s policy because JISDOR could serve as benchmark for domestic exchange rate as it was not formed on the basis of quotation, but on actual transaction. As known, today there were many financial instruments which were derivatives and referred their exchange rate to non deliverable forwards which was not 100% credible where quotations were made by traders.

However BI had to make sure that the domestic forex market was liquid so JISDOR could serve as credible benchmark. If the market was not liquid, for example no transaction, JISDOR could become incredible. On the first day JISDOR was put in effect, Rupiah exchange rate value was stronger that other exchange rates. On that day [20/5] according to JISDOR Rupiah exchange rate was Rp9, 760 per USD.

The Capital Market

Index of IHSG strengthened by 29.31 points or 0.57% to the level of 5, 150.71 in Session I of transaction last weekend [24/5]. Through session I, index moved in the range of 5, 130 – 5, 175; finally increasing by 20. 309 points [0.57%] to the level of 5, 150.712; Meanwhile index LQ 45 strengthen by 4.666 points [0.54%] to the level of 869.539.

173 shares of 464 shares being traded to day strengthened. Meanwhile 68 shares weakened and 223 shares remained stagnant. Of the 9 sectors, 2 sectors posted downturn, i.e. the financial sector 0.5% and mining 0.19%. Three indices posting highest strengthening was construction 1.78%, various industries 1.35% and agribusiness 1.32%.

To be exact, index increased by 29 points due to act of buying by investors. Correction of the mining sector restricted index strengthening. During opening session, IHSG increased by 23.679 points [0.46%] to the level of 5, 145.100 in line with rebound of the Asian market. The regional stockmarket which was previously affected by great acts of selling was now again energized.

Premium shares which were yesterday axed deeply were again sought after by investors. Index was trying to play catch up with yesterday’s losses by moving up to highest position today at 5, 174.671. Unfortunately the premium shares of the mining and banking sectors were again subject to acts of profit taking. The correction held back strengthening of IHSG although it did not have to fall into the red zone.

Transactions were quite busy with frequency of transactions posted at 105, 213 times at the volume of 3.002 billion shares worth Rp3.261 trillion. 176 shares went up, the remaining 68 went down, and 99 were stationary. It was projected that till closing session index would move in the range of 5, 170 – 5, 185 with the tendency to strengthen.

Meanwhile regional stockmarkets mostly strengthened till noon, only the Hong Kong stockmarket was still low. Asian investors were beginning to have the courage to buy shares after previously busy with acts of selling.

Index of Composite Shanghai inched up by 2.17 points [0.10%] to the level of 2, 277.84. Index of Hang Seng slumped by 45.47 points [0.20%] to the level of 170.83 points [1.18%] to the level of 14, 654.81. Index of KOSPI increased by 1.50 points [0.08%] to the level of 1, 970.69.

At the local Security Exchange Market [BEI] shares of the infra-structure sector still hand the change to strengthen through this year, especially if the Government could ease permit application for property and construction. By average, the price to earning ratio [PER] of the construction service emitents based on financial report of the first quarter was 29.27 times.

Based on index of the Indonesia Security Exchange [BEI] by year-to-date, index of the infrastructure itself had increased 23.61 times. One of the companies of the construction sub-sector who planned to start Initial Public Offering was PT Acset Indonesia, who offered 150 million of shares or 30% of the paid up capital. The Management of Acset offered their IPO price in the range of Rp2, 200 – Rp2, 750 per share.

The Management of Acset set target to raise fund from IPI between Rp330 billion – Rp412.5 billion. The underlying calculation system for IPO shares was some platforms like discounted cash flow and comparison against same type of shares at the domestic or regional market.

A specifically share of PT Perusahaan Gas Negara [PTGAS] was rated as quite interesting to be accumulated. Besides increasing distribution support, the average selling price also increased. In quarter I 2013 the income was booked at USD 731 million, an increase from USD 583.2 million in quarter I 2012.

The company also succeeded to book growth of distribution volume by 5.7% to become 883 mmcfd from the previous 787 mmcfd in quarter I of 2012. However, the same thing did not happen in gas transmission business which in quarter one 2013 dropped to 887 mmcfd from 911 mmcfd in quarter one of 2012.

The profit to be attributed to owner of main entity of PGAS in quarter one 2013 inched down by 3.8% to become USD 265.3 million against USD 275.9 million of the same period last year. The downturn was mainly due to stationary gross profit of PGAS in quarter one 2013 which came to USD 359.4 million.

To secure gas supply, PGAS was taking measures to increase supply either from conventional gas resources or from re-gasification program of LNG. In the midstream of gas pricing chain PGAS added on transportation mode of gas by building the second FSRU in Lampung. The constriction was targeted to be completed by end of 2014. In tandem with the Government’s policy gas buying price, analysts projected the average price of gas distribution in 2013 to reach USD 9.11 mmbtu.

Furthermore, total volume of gas distribution in quarter one 2013 could grow wheby to serve as elevator of PGAS financial performance. This was to consider that gas distribution business served as main source of income for PGAS.

The only thing was that shares of the transportation and banking sector must be observed following increase of subsidized oil price as the two sectors were inflation-sensitive. However over the week index was projected to move in the range of 5, 165 – 5, 185 with tendency to strengthen. (SS)

Business News - May 29, 2013                

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