MACRO INDICATOR COMFORTS THE MARKET

The development of Indonesia’s macro economy this year was predicted to better to comfort the market. Apart from BI’s rate which settled at 5.75% and controllable inflation, increased forex reserves by end of April injected positive sentiment to the market.

               

Only trouble was that the market was still waiting for the Government’s decision about cancelling oil price subsidy. Somehow the market already predicted price of oil would not be increased; only the magnitude and timing was still not certain. About the Government’s decision the market believed “the faster the better”

The Money Market

               

Rupiah was again closed to rise on Wednesday last [8/5]. The market’s zest flared up again as China booked figures above expectation. Rupiah value against USD was closed to strengthen due to increased risk appetite. This was triggered by report or surplus in China’s released trade balance which exceeded estimation. China’s released trade balance rose to USD 18.6 billion by April 2013. Therefore through the sessions Rupiah reached its highest level at Rp9, 725 the lowest level being Rp9, 735 per USD.

               

China’s trade surplus figure was above the economists’ estimate of USD 15.55 billion which exceeded the previously published figure of minus USD 884 million. Meanwhile China’s export showed deficit of 14.7% of the posted increase of 14.7% of the predicted 10.3% and 10% of the month. China’s import also increased by 16.8% of the predicted 13.9% and the previously published 14.1%.

               

Apart from the above, investors were optimistic about inflow to Indonesia. The bond’s auction of 5 year-tenure last week showed notably high bi-to cover ratio. The condition showed investor’s great zest in Indonesia’s stock market. Evidently Indonesia managed to auction bonds worth Rp11.5 trillion. The figure exceeded Government’s own target of Rp8 trillion. Meanwhile bid to cover ratio which indicated demand for bonds rose by 2.10 times although the yield showed increase of 4.99% for five year tenure against yield of previous auction. The increase of yields was due to S&P rating which lowered Indonesia’s outlook from positive to stable.

               

Meanwhile SD value jumped up against other currencies last Thursday [9/5]. Even against yen USD broke through 100 yen for the first time in the last 4 years. Strengthening of USD was due to new employment data which strengthened confidence in US economy. Green buck value soared up to 100.55 Yen, against the previous 9.01 Yen.

               

This had been for long when the BoJ injected more liquidity to Japan’s economy to cover up deflation hole. USD strengthened by more than 30% against Yen since the lowest level of 77 yen last September. Meanwhile against Euro, USD strengthened more than 1%. Euro was at USD 1, 3044 USD against the previous USD 1. 3156.

               

The USD was elevated by US economic data. Initial unemployment data in the USA, dismissal rate, fell into seasonal figure of 323, 000 last weeks, the lowest level since January 2008. Analysts’ interpreters the data as promising condition the Federal Reserve Bank would tighten their monetary policy this year instead of 2014, which would uplift Green buck value.

               

The aggressive stimulus program ran by BoJ might weaken Yen. The low monetary return might weaken toward BoJ’s next decision on May 22 when adopting more aggressive approach to block deflation. Meanwhile British Pound sterling weakened to USD 1. 5451 against the previous USD 1. 5536. Against Swiss Franc, USD increased to 0. 9479 Franc against the previous 0. 9532 Franc.

               

Broadly speaking Euro’s value weakened against some of the world’s leading currencies. This weakening was a correction to Euro’s up jump. In the past week, it would be advantageous to Euro due to axing of bank’s interest by ECB and Germany’s positive industrial data. Data of purchase order in Germany was surprising. Orders which were adjusted to seasonal change and inflation in Germany in March came to 2.2%, exceeding an initial expectation which was only estimated at only 0.4%. Increase was also notable in export orders, semi finished goods and investment goods of Germany which also rose by 2.7%, 3.6% and 2%.

               

Analysts stated that most probably ECB would no more slash interest until 2015. BY prediction ECB would maintain interest at 0.5% till end of 2014. Previously President of ECB Mario Draghi stressed that he was ready to slash interest again whenever necessary. Lack of good news from Europe suppressed Euro’s value against other main currencies. Moreover annual inflation rate in Europe slumped to 1.2% against March which was posted at 1.6%.

               

In a survey run by ECB, predictably economists would axe outlook of Europe’s GDP this year. Economists predicted economy of 17 Euro user countries would contract by 0.4% this year. Previously economists would stay stagnant at zero percent compared to previous year.

               

In tune with ECB, Bank of England last Thursday [9/5] decided to maintain credit interest rate at the lowest level of 0.5% contrary to the steps of a number of central banks who had axed credit expenses. BoE was also against injecting new stimulus in cash to boost economic growth in a voting at monthly monetary policy meeting.

               

The Monetary Policy Committee [MPC] of the Bank of England chooses to maintain official bank interest paid to commercial branch bank at 0.5%. BoE stated that the Committee also choose to maintain stock of assets buying financed by the reserves of commercial banks at 375 billion Pounds. [USD 584 billion or 445 billion Euro].

               

The interest of credit of Bank of England was at the level of 0.50% percent since March 2009 when this Central Bank started the Quantitative Easing the radical way.

               

At home, good news came from the Central Statistics Board [BPS] which posted economic growth through the first quarter of 2013 at 6.02% against same period the previous year. This attainment was below Government’s target in APBN Budget 2013 which was 6.8% all year through. Meanwhile price based GDP in quarter I 2013 was Rp2, 146.4 trillion and GDP on constant value basis was Rp671.3 trillion. Meanwhile price-based GDP as per quarter I 2012 was Rp1, 965.5 trillion while GDP on constant price basis in quarter I 2012 was Rp633.2 trillion.

               

Economic growth of quarter I 2013 based on expenditure was driven by household consumption which grew by 5.17% and former of gross fixed capital which grew by 5% compared to same period last year. Meanwhile Government’s consumption expenditure inched up by 0.42%, export rose by 3.39% and import dropped by 0.42%.

               

Consumption increased thanks to growing consumption of the emerging middle class where there was increased consumption by middle class families. In spite of lowered import, domestic consumption was still positive. In terms of business line compared to same period last year, the highest growth was posted at transportation and communication 9.98%, the real estate and company service 8.35% and construction 7.19%.

               

Compared to quarter IV 2012, the highest growth was in the sectors of agriculture, livestock farm, forestry, and fishery 23. 06% the finance, real estate, and company services 2. 96%; and the transportation and communication services 1. 75%.

               

The next good news was from Bank Indonesia who reported that forex reserves in possession today was showing significant increase, i.e. USD 2.46 billion by end of April 2013.

               

The increase was an advantage because it served as liquidity reserve to be used whenever needed. The forex reserve owned by BI today was posting growth. Such was thanks to yields of global bonds issuance amounting to USD 3 billion by the Government sometime ago.

               

Of the global bonds issuance the Government would soon book income in Rupiah denomination which would be used for financing projects listed in APBN State Budget 2013. Totaled USD 2.46 billion inclusive of fee payment due, minus tax etc and certainly also payment of overseas debts and fees due, and taxes.

               

As known, Indonesia’s forex reserves by April 2013 came to USD 107.26 billion after additional income of USD 2.4 billion, against the previous USD 104.8 billion. Meanwhile the position of national primary money by April 30 was Rp667.12 trillion. The value of banknotes and coins in circulation was posted at Rp392.22 trillion and giro balance came to Rp234.05 trillion.

               

The condition of forex reserves above USD 100 billion was noteworthy attainment because it would finance import and be used for paying overseas debts for the next 6 months. The sizable forex reserves could maintain market’s trust and stability of Rupiah value. All in all this week Rupiah value against USD would be in the range of Rp9, 700 – Rp9, 750 with tendency to slightly strengthen.

The Moneymarket

               

IHSG scored highest record throughout history during session on Wednesday [8/5], one day before national holiday. Index of LQ45 shared the uplift by moving up by 0.65%. Jakarta Islamic Index [JII] also rose by 0.98%. Transaction level again moved up to Rp9. 786 trillion. Trade volume posted 7. 126 shares which changed hands. Foreign capital inflow was still positive which led to net buy of Rp176 billion.

               

Analysts rated that the favorable regional condition was the reason why investors still dared to take positions. They were aware that foreign investors were doing most net buying. This was in parallel with the strengthening domestic sentiments amidst bad news of Indonesia’s lowered outlook and Government’s indecision about increasing oil price. In the future IHSG prospect would be related to oil pricing policy. Still it remained a question if price of subsidized oil were increased, would the stockmarket elevate?

               

Meanwhile index of the majority shares in Asia were continuing increase during closing session last Wednesday [8/5] while shares in Wall Street ended up in the red zone during session on Thursday [9/5] when investors were making their profits after continually closed at high level.

               

Index of Dow Jones Industrial average slumped by 22.50 points [0.15%] to become 15, 082.62. Index of S&P 500 inched down by 6.02 points [0.37%] to stop new record making for five consecutive days. Index of Nasdaq Technology Composite was corrected by 4.10 points [0.21%] to become 3, 409.17.

               

The downturn occurred when there were reports of varied company’s profit in line with USD’s motion toward important level against yen, exceeding 100 yen for the first time in four years. Stockmarket players seemed “exhausted” after constant rally of index in a few days. Marketplayers also speculated that Chairman of the Federal Reserve Bank Ben Bernanke might signal withdrawing of stimulus during public appearance in Chicago.

               

One thing was sure some negative rumors were overshadowing the New York stockmarket. The Apache Corp oil company failed to meet profit projections, but increased by 4% after announcing divestation plan of USD 4 billion by end of 2013 and spending of USD 2 billion for buying 30 million shares.

               

Daring coupon [on-line] company Group on increased by 11.5% after reporting the profit which income target of USD 601.4 million exceeding the estimated 588.9 million. Producer or Tesla electrical car jumped up by 24% after booking profit 3 times as much as estimate, and further increased projection of cars to be delivered in 2013.

               

It was noteworthy that for the first time in four years, Yen value nosed dived to exceed 100 yen per USD. This weakening instantly buoyed exporter’ shares at Japan’s stockmarket.

               

Index of Nikkei 225 Stock Exchange rose by 0.7%. Index of Topix also rose by 0.5%, soaring up to highest level in 4.5 years. This was related to weakening of Yen by 0.2% to 100.77 per USD. Index of Topix soared high by 2.2% to 1, 207.69 breaking through highest closing level since September 2008. Index of Nikkei 225 Stock Average rallying by 2.6% to 14, 5554.90 Shares price of Mazda Motor Corp, the most export-dependent automotive producer rose by 4.2%.

               

Shares of Mitsui Fudosan Co, the biggest developer in Japan, also rose by 5% after making net profit and was expected to increase by selling more apartments. Shares of Sony Corp. soared up by 4.5% after making profit although it had lost for 4 consecutive years before. The conclusion: weakening of yen was just in time for exporters.

               

However at about the same time, index of MSCI Asia Pacific outside Japan fell by 0.5%. The correction occurred after this Asian reference index mounted to its best level since July 2011. Australia’s stockmarket inched up by 0.1% after reaching the highest level in the past 5 years. Index of Kospi South Korea was opened to drop by 0.5%.

               

Increase of benchmark indices in Asia’s stockmarket were often traded in line with China’s trade balance which again scored surplus. Holding Plc performance in the first quarter of 2013 which pleased investors posed as positive sentiment. Index of MSCI Asia Pacific rose to 143.44 points. All through this year reference index at the Asia Pacific stockmarket rose by 9.8% accumulatively this year amidsts soaculations that Japan’s Central Bank would inject more stimuli to tacle deflation.

               

Index of Australia’s S&P/ASX rose by 1.1% which was the highest closing in the past 5 years. The swap contract showed 50% better in line with the Reserve Bank of Australia [RBA]’s chance which lowered benchmark interest next July. Last week the Australia Central Bank has lewered bank’s interest while controlled inflation allowed more room for applying monetary monetary easing policy.

               

NZX index of New Zealand rose by 0.4% in relation to the statement of the Governor of NZ Central Bank that there were chances of lowering bank’s interest. Fast increase was also happening in South Korea’s stockmarket. Index of Kospi rose by 0.1%. Index of Straits Times in Singapore stockmarket rose by 0.9%. Tai-ex index of Taiwan also rose by 1.3%. Hang Seng Index of Hong Kong rose by 0.9%. Shanghai Composite Index of China rose by 0.5%. The upgoing shares in Asian stockmarket last week were among others Komatsu which rose by 4.4% and Wilmar International Ltd which rose by 2.7% while HSBC rose by 1.7%.

               

At the domestic stockmarket, IHSG movement last weekend [10/5] was predicted to remain strong to break through the pyschological level of 5, 100. Flow of IHSG had support level of 5, 055 and resistance level of 5, 120. Although last week there was the Thursday [9/5] holiday facor which could thin out transaction volume, it was no problem IHSG the break through 5, 100.

               

Today IHSG pulsation was no longer determined by foreign investors. Evidently when there was weakening in the regional stock market, IHSG moved suprisingly and so was the reserves. Meanwhile economy wise as read by the market, Indonesia had its own strength. Therefore even in the position of net sell foreign investors could not be seen as the determinant factor as IHSG soared sky high without them.

               

Futhermore foreign investors acquired some big companies which signaled their opstimism about asset market in Indonesia. Strengthening of stock index also had support from emitent’s financial report of quarter I-2013. The increase of IHSG index to 5, 100 was without support of shares of the minery and plantation sectors but rather it had support from infra-structure, property, and banking sectors which soared high by price.

               

If only the Government had courage to increase oil price next June, IHSG would perform extraordinary upjump. The minery and plantation sector would also elevate to support index strengthening process. With oil price subsidy, the market saw that the Government was throwing away too much money for inefficient purpose just like throwing salt to sea.

               

Meaning subsidy did not help the small people and the middle class. Subsidy only drive people to buy cars and use subsidized fuel and yet supposedly car owners buy oil at market price. Supposedly subsidy was allocated for posts which were beneficial to the public like infra structure and public transportation.

               

Now even public transportation like busway was uncomfortable. Even with off-target subsidy IHSG was able to strengthen to near 5, 100, imagine if the subsidy fund shich amounted to Rp 200 trillion was allocated for the public transportation and infrastructure. If subsidy for oil were withdrawn analysts estimated IHSG could strengthen to 5, 800. However for this week IHSG was predicted to hoover around 5, 080 – 5, 120 supported by shares of the financial sector especially banking and retail. (SS)   

Business News - May 15,2013