Introduction
In the quiet of night, all of sudden Standard and Poor’s rating agency
revised Indonesia’s prospect into stable against the previous positive. They
rated that the recovery momentum was too long, while the potential for rating promotion
had lessened.
S&P last Thursday [2/5] confirmed BB + for long term sovereign
credit and B rating and B rating for short term sovereign credit. Besides also
ASEAN axBBB + regional scale + /Axa-2 for Indonesia.
It was also mentioned that alteration and appraisal of risk
convertibility remain unchanged at BBB- besides BB+ rating on Senior Unsecured
Notes Indonesia. According to S&P the revised outlook to stable reflected
their evaluation that the momentum of recovery was too long and external profile
was weak which reduced the potential of rating increase for the next 12 months.
For sure the lowered rating resulted in negative sentiment for Rupiah
and IHSG at the Security Exchange moreover negative sentiment from Europe was
still prevalent in Indonesia’s moneymarket.
The Moneymarket
Rupiah value against USD at the inter-bank spot market Jakarta last
Friday [3/5] was seen to weaken. One of the causes was negative data released
in Europe. The cause of Rupiah weakening last week end was among others released
Producer Price Index data from Europe [PPI].
The figure was predicted to slump to -0.2% [monthly] of the previously
published 0.2%. Meanwhile annual PPT was predicted to drop to 0.6% against the
previous 1.3%. The sentiment worsened the effect of ECB which previously axed
benchmark rate by 25 basic points to 0.5% which weakened Euro and automatically
strengthened USD but was negative pressure on Rupiah.
Therefore, gradually Rupiah was seen to weaken last weekend in the range
of Rp9.715 to Rp9, 755 per USD. Besides, Rupiah weakening was also triggered by
the market which was still waiting for data of non-farm payrolls USA. The
figure was predicted to increase to USD 150,000 against the previously
published 88 thousand. Moreover, unemployment level in the USA was predicted to
settle at 7.6%. The condition served as positive sentiment to USD but on the
contrary posed as negative pressure on Rupiah.
Rupiah weakening was still triggered by lowered future projection of
Indonesia’s economy by S&P. The condition had not made foreign investors
need Rupiah. Previously during transaction last Thursday [2/5] Rupiah value
against USD was closed to weaken by 5 points [0.05%] to the position of Rp9,
735/Rp9, 740.
The market was influenced by negative sentiment of Standard & Poor’s
Rating Services who revised outlook of Indonesia’s debt rating. According to
S&P the Government of RI had been wasting time and missed the momentum of
economic reformation. Consequently, the chances of Indonesia to get better
rating were lost.
Somehow S&P maintained short term credit level from ‘BBB +’ and long
term at ‘B’ level. Therefore through the sessions Rupiah continued to slump. It
was noteworthy that the Philippines was promoted to investment grade level by
S&P which means that the Philippines had outclassed Indonesia whose rating
was lowered from positive to stable.
The Philippines rating in terms of long term debt in foreign currency
was promoted to BBB- in terms of the previous BB with stable outlook. It was
mentioned that the Philippines’ rating promotion reflected stronger external
profile, moderate inflation, and less dependency on foreign currency debt.
The Philippines President Benigno Aquino’s action to change the nation
into a fastest growing economic zone had been empowered as the Government
projected investment record this year including expansion of companies like
Murata manufacturing Co. All in all, Peso strengthened to higher level in the
past 3 weeks to 41.055 peso per USD to reserve previous downturn.
This Philippines Peso booked highest increase in the past 12 months
after Thailand’s Bath of 11 Asian currencies tracked by Bloomberg. Index the
Philippines stock market [PcomP] strengthened by 0.3% before announcement after
jumping up to the record last April. This higher rating could increase capital
flow to the Philippines. Bangko Sentral ng Pilipinas [BSP] the Philippines
Central Bank had to take special measures to restrict the risk of asset bubble.
Last month BSP axed fixed deposit account interest for the third time
this year, but maintained bank interest for overnight deposit at the lowest
record of 3.5%. Meanwhile BSP would remain to be cautious about the risk of
bigger capital inflow. The Philippines economy which was twice as big as
Malaysia and 10 times as big as Singapore in 1960 grew at 6.8 in quarter four
of 2012.
Meanwhile in Greece, the Parliament managed to pass a Bill which
prepared dismissal in the public sector. The Bill which was passed last week
ratified changes agreed upon with the creditors. The Bill package was
precondition for two-phase bail-out for Greece which totaled Euro 8.8 billion
or around Rp111 trillion.
This new policy was
additional conditions to the various pre-conditions to cash their bail out.
This also indicated an economic recovery process which was far from normal.
Struggling Greece and Cyprus confirmed that Europe’s economy was still a far
cry from recovery. This was a negative sentiment for Asian currencies which
were rated as risky including Rupiah.
Consequently even good news at home was ignored by the market. As known,
the Central Statistics Board noted that in April 2013 there was deficit of 0.1%
due to downturn of food price. Based on expenditure category, food contributed
deflation of 0.8%, followed by clothing 1.13%. The clothing segment was having
deflation because of downturn in gold price.
Meanwhile the category of ready food, cigarettes and tobacco contributed
0.3% to inflation, followed by the category of Housing, gas and fuel which
posted inflation of 0.41%. the health category contributed 0.22% to inflation;
education, recreation and sports contributed 0.15% to inflation while
transportation, communication and financial services posted deflation of 0.1%.
BPS also posted inflation rate of January-April 2013 at 2.32% and y.o.y
5.57%. Meanwhile inflation of the core component in April 0.14% and by y.o.y
was 4.12%. The adverse condition in Europe, in additional to lowered
Indonesia’s rating brought pressures on Rupiah over the week which was
predicted to move in the range of Rp 9, 725 – Rp 9,775 per USD.
The Capital Market
Meanwhile index of IHGS in the early session last week [3/5] was opened
to weaken by 0.02% to the level of 4,992.97. IHSG slumped, followed by LQ 45
which weakened by 0.22% to the level of 485. 37, index of JII shares weakened
by 0.01% to the level of 674.83. The weakened sectors were among others the
sectors of mixed industry, finance and agro business.
IHSG’s resistance level was projected at 5, 040 and support level was 4,
980 during closing session of last week. Previously IHSG broke through the
level of 5, 000. Unfortunately the long awaited psychological level did not
last long. IHSG resistance was still being tested by some negative sentiment
which recently influenced share transactions at BEI.
However there was still optimism that index would again improve its
position and bounch back to above 5, 000 and higher. In Thursday session [2/5]
IHSG was closed to weaken due to act of profit taking following the trend in
Asia. IHSG BEI was closed to go down to 66.87 point or 1.32%to the position of
4, 994.05 while index of LQ45 weakened by 12.47 points [1.48%] to 847.29.
Although index of BEI was stormed by profit taking due to weakening
Asian stockmarkets, index was still above psychological level. Hence
predictably after the downturn index still had strengthening potential, to
break through 5, 100 points once more.
Only trouble was the target was hard to meet because this week negative
sentiment broke in as S&P revised Indonesia’s outlook from positive to
stable. Somehow S&P still maintained Indonesia’s rating at BB+. This new
rating would have its short-term effect on the stockmarket. Analysts believe
that Indonesia’s lowered rating would have impact on the stockmarket.
Some fund managers who were following S&P recommendation would
reduce their portfolio in Indonesia, because investment risk was feared to
increase. However fund managers who referred to Moody’s & Fitch
recommendation would rather wait and see until the two rating agencies come up
with their latest recommendation.
Furthermore the possible effect of fund managers reducing their
portfolio was bursting acts of selling. However the impact of Indonesia’s
lowered debt rating was only for the short term. As soon as portfolio was adjusted
index would turn back to normal.
S&P’s recommendation was warning sign for the Government to make a
policy which supported economic growth. The Government needed to act fast to
normalize investment climate for example to spur on building of the Foxconn
factory which so far did not indicate Government’s commitment to enhance
investment climate.
Other opinions had it that Indonesia’s lowered rating was partly already
predicted by the market. This was related to the continual postponement of oil
price increasing by the Government, which was the main reason for S&P to
stipulate Indonesia’s rating.
At the regional stockmarket, among others index of Hang Seng weakened by
68.71 points [0.36%] to the level of 22, 668.30, index of Nikkei-225 dropped by
105.31 points [0.76%] to the level of 13, 694 and index of Straits Times
strengthened by 34.21 points [3, 402.39].
What troubles stockmarket players lately was uncertain timing of oil
price increase, as the Government was rated as indecisive; the market was just
as confused. Previously index of BEI once broke through 5, 000 on April 18,
2013. This was IHSG’s spectacular achievement compared to last year’s level at
3, 346. There some factors that caused fluctuation of shares:
Firstly, increased price of shares was due to fundamental performance of
company especially financial performance. Increased net profit would jack up
earning per share to be followed by increased price of company’s share.
Secondly, corporate action with jacked up performance in the long run.
For example a company which issued new share through right issue for paying
company’ debt, in the long run was expected to increase company’s profit as
there was no more obligation to pay debt and interest.
Other example was: company’s having long term contracts to increase
company’s revenue and further drum up new investors to expand business.
Thirdly increased of price share could also be triggered by positive
sentiment of the industrial sector. For example the property sector was being
sought after by investors so emitent’s shares of the property sector increased
accordingly. Increased per capita income of the people means increased people’s
purchasing power. Under such circumstances consumer goods would get positive
impact. Shares of this sector like retail, food, household goods and
automotives would be increased as well.
However, not all shares would post increase. There were times when price
of shares dropped as market sentiment declined. Besides, price of emitent’s
share might slump if financial performance of the emitents worsened. In
additional to that there were some occurrences which could lower emitence
performance in the long run which would cause share price to drop.
For example, business contract being cancelled by business counterparts
which affected company’s income and conflict among share holders would also
lower share price; also acts of majority share holders who sell their shares to
other parties.
Lowered share price also happened because the business sector was in
adverse condition for example because credit interest soared high. Shares of
emitents of the banking sector would get negative sentiment as increased
interest caused non-performing loan. A condition as such had the potential to
affect performance of emitternce of the banking sector.
Even if the market was in normal condition without negative sentiment on
the macro economy or sectoral economy, the risk of falling share price was
always there. Fall of share price could happen under the pressure of certain
circles like speculators.
Therefore investors should be keen eyed in observing the situation which
might causes share price to increase or drop. Investors were also advised to
always monitor macro economic development and the business sector and company’s
performance through regularly published financial journal.
The situation in Wall Street, N.Y. must also be constantly advised. Apparently
data of better unemployment claim had driven US stockmarket to strengthen
significantly last Friday [3/5]. Index of Dow Jones rose by 0.8% to 14, 831.58;
index of S&P rose by 0.9% to 1, 579 and index of Nasdaq rose by 1.2% to 3,
340.62. Strengthening of Dow index had support from Cisco shares and American
Express. Index of S&P could even touch the previous highest level of 1,
598.60.
Unemployment claim last weekend dropped to the lowest level since
January 2008 from 16, 000 to 342,250. Dismissals plan moved to the lowest level
since December last which dropped nearly by 23% in March. The market was still
waiting for monthly unemployment claim. Early estimate came to 140,000 in
April, an increase of 88,000 in March.
Data of deficit in US Trade Balance turned out to be more than expected
in March. The cause was notable drop of import since 2009. Strengthening of
index was also jacked up by ECB’s policy who lowered interest level from 0.75%
to 0.5%.
So far there was 75% or more companies of S&P index who had
submitted their quarterly income; 69% exceeded income expectation and 4.8% of
the same period last year.
Combination of the three external factors would lead IHSG all through
the week in the range of 4,980 – 5,010 with tendency of being stable. If the
Government dared to increase price of subsidized oil this week, it would bring
short term negative effect at the stockmarket but stockmarket index would
bounch back again to 5,100 and further as oil price was increased. (SS)
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