Over the week, the issue of price increase of subsidized oil would still
be the investor’s attention. The moneymarket would react, and so would the
stockmarket. By logic of the market, supposedly increase of oil price would be
responded positively.
However, the global factor would also determine domestic market
activities especially in regard to two main issues: global economic slowdown
and the possibility of the fed lowering the fiscal stimulus gradually.
The combination of domestic and global factors would influence
activities of the local moneymarket all through the week so it was difficult to
make any protection whether on the Rupiah side or stockmarket side.
The Moneymarket
Early last week, Rupiah movement ignited suspense, as Rupiah value again
jumped up to above Rp100,000 per USD. Other Asian currencies also weakened
against USD [21/6]. Rupiah weakened by 0.51% to the level of 10,033 during
early opening session.
Some leading currencies in Asia also joined the downturn like Singapore
dollar, the Philippines peso, Malaysia ringgit, and Thailand’s bhat at
different weakening rate. Toward afternoon session, Rupiah strengthened to the
level of Rp9,920 against the position on Thursday [20/6] at Rp9,900 per USD.
Extra protection by BI kept Rupiah from sinking any deeper, which
weakened only by 25 points against USD. Meanwhile the domestic bond market
seemed to be under pressure in terms of return although BI continued to stand
by and bought them. In fact last week Indonesia’s moneymarket was disadvantage
by uncertainty of oil price until the government finally announced oil price
increase on June 21, 2013.
The fact was that USD soared high against world’s leading currencies
including Rupiah, after the Fed’s meeting who announced that the risk of
economic slowdown and unemployment in the USA had ceased. Strengthening of USD
was supported by Governor of the US Central Bank Ben S. Bernanke who stated
that the Fed might reduce bond buying’s by end of year and stop it completely
by mid-2014 if economy continued to improved according to projection. The Fed
was quite optimistic about America’s economic growth, progress in the labor
market and Housing would serve as reference to reduce the monetary stimulus
program.
Bernanke’s remark made USD jump up to its highest level in the past week
against Yen. USD also strengthened against most of the leading currencies
including Euro. Against Euro, USD strengthened to USD 1.3215 against the
previous USD 1.3294.
Broadly speaking Rupiah exchange rate value against USD was still unstable,
and recently fluctuating in the range of Rp9,800 – Rp10,000 per USD. Originally
weakling of Rupiah value should b in time when the government announced oil
price increase last week, but apparently the government only announced the fuel
price increase on June 21,2013
The Asian currencies which were most vulnerable to capital flight was to
those countries having deficit in their trade balance. The sensitive Asian
currencies were India Rupee, Indonesia Rupiah and Australia Dollar. To
anticipate the after effect of global economic restlessness in line with the
plan to reduce stimulus of Quantitative Easing by the Fed, the Government of Ri
was expected to be sure-footed and swiftly make the necessary decision.
Lately Rupiah downturn went as low as Rp10,000 per USD due to increased
capital outflow. In this case BI already had the early warning system whereby
to detect the potential economic outburst with its predictable affect on
Indonesia. Somehow this BI instrument would be of no use if the government were
not spontaneous in making decisions.
The impact o global economic turbulence might come late, or sooner than
expected; so to anticipate the after effect of this global turbulence,
supposedly the government had the courage to make decisions. The instrument to
anticipate turbulence was fiscal on the government side, and monetary on BI’s
side. The two authorities: the ministry of finance and BI, must foster sound
coordination in making the right decisions.
Although the government finally decided to increase fuel price, the
actions were rated as mush too slow. The result was that Rupiah was black and
blue. The government stipulated the new price for subsidized oil at Rp6,500 per
liter for benzine and Rp5,500 for solar oil. The Ministerial Regulation as
legal base for the implementation of oil price increase was already signed.
In regard to that matter, BI predicted inflation rate would increase by
2.2% - 2.4% in the first 3 months after the increased price of subsidized oil.
BI predicted that inflation would turn loose in the first month since increase
of fuel price, but begin to gradually subside in the following months. By the
above picture, for this week Rupiah was predicted to move in the range of
Rp9,875 – Rp9,925 per USD with tendency
to inch up.
The Capital Market
Just like suppressed Rupiah, IHSG also slumped by 79 points as anxiety
mounted about global economic slowdown. There were selling sprees all over the
regional stockmarket. During pre-opening session last week [21/6]. IHSG fell by
79.751 points [1.72%] to the level of 4,550.243 while index of LQ45 fell by
20.156 points to the level of 740.448.
Furthermore during opening session last weekend [21/6] IHSG was opened
to slump by 119.806 points [2.37%] to the level of 4,520.188 while index of
LQ45 was opened to sink by 26.924 points [3.54%] to the level of 733,680. So
hectic was the selling spree that all sectoral index was on fire and under
severe correction. Meanwhile index of LQ 45 fell by 26.392 points [3.47%] o the
level of 734.21.
Even a day before [20/6] IHSG was corrected by 141 points following
selling spree by foreign investors and index instantly fell to the level of
4,600. Anxiety over economic slowdown in China and the possible ending of
stimulus by the Fed made shares at Wall Street sink quite deeply.
In Asia, stockmarkets slided down simultaneously to the red zone in
response to the negative sentiment at the global stockmarket, more than 1% on
the average. Index of Composite Shanghai fell by 32.24 points [1.55%] to the
level of 2,051.79. Index of Hang Seng fell by 338.20 points [1.66%] to the
level of 20,044.67. Index of Nikkei 225 sank by 252.92 points [1.94%] to the
level of 12,761.66. Index of Straits Times was axed by 42.37 points [1.35%] to
the level of 3,090.89.
The pressures on the domestic stockmarket which paralyzed price of share
at BEI originated from external negative sentiment. In fact the condition and
prospect of the capital market was positive as indicated by performance of
domestic emitents which posted growth up to double digit. This indicated
positive domestic economy which had its impact on the capital market.
The Fed’s action of trying to reduce stimulus to reduce stimulus to
reduce bond’s buying’s in American, and the indefinite fuel price increase in
Indonesia were reasons for foreign investors to walk out of the stockmarket.
Form Indonesia’s viewpoint, to neutralize negative sentiments it was necessary
to take educative measures to local marketplayers besides increasing the number
of investors. As known, domestic investors were low by quantity, only 1% of the
population which was posted at 242 million people.
In fact the marketplayers were disappointed about the Fed’s decision to
reduce buying of US bonds in tandem with the notable recovery of US economy.
The result was that today marketplayers tend to be reserved and take the
profit-taking stance of highly capitalized shares.
Evidently last Thursday [20/6] IHSG BEI was closed to drop by 176.66
points or 3.68% to the position of 4,629.99, while LQ 45 weakened by 35.29
points [4.43%] to the level of 760.60. The pressure on the domestic stockmarket
was on account of negative external sentiments.
Moreover the Fed’s actions and uncertainty of oil price increase were
reasons for foreign investors to walk out of the stockmarket. Foreign investors
rushed to sell their shares in response to the negative sentiments, while domestic
investors followed the trend by doing the same.
Premium shares which were highly capitalized were subject to selling
spree, to make IHSG lose high point. However, there was still one industrial
sector which had the potential to strengthen, i.e. the agriculture sector. Not
just Asian stockmarket was under pressure, fear of economic slowdown in China
and the possibility of the Fed ending the stimulus program made Wall Street
sink quite deeply.
Wall Street was deeply corrected after Bernanke’s remarks signaled
ending of stimulus starting this year. In Thursday session last, index of Dow
Jones fell by 354 points [2.3%] to the level of 14,758.32 while index of
S&P slumped by 2.5% to the level of 1,588.19 and Nasdaq dropped by 2.3% to
the level of 3,364.63. The condition would continue over the week until there
was clarity about reduction of bond buying by the Fed.
Apart from suspended oil price increase and pressures by the Fed, in
fact the domestic stockmarket already had its positive sentiment from BI’s
decision to increase BI benchmark rate from 5.75% to 6% last week which was
rated as positive signal of national economy which had its positive impact to
Indonesia’s economy for the long run.
For this week IHSG was predicted to strengthen after deep correction
last week. IHSG was predicted to move in the range of 4560-4640. Certainty of
fuel price increase which was already announced would bring investors back to
the stockmarket. (SS)
Business News - June 26,2013
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