This week market players still focus their attention on the US
Government’s plan through their Central Bank the Fed to gradually stop the
stimulus package plan until next year.
In spite of the on-and-off process of the plan, in view of the ever
improving US economic data, there were signals that the plan would actually be
exercised in the short run, although steps were most probably be gradual.
Termination of the stimulus package would drive outflow of foreign
capital, although only on the portofolio sector. Other notable point was that
the plan might strengthen USD as indication of bettered US economy. However it
was also possible that appreciation of USD would might hamper US economic recovery
since an over-strengthened currency was not a good point for uplifting export.
So it was worthwhile to constantly observe Ben Bernanke’s next step, the
number one man in the Fed for the short terms as it would be used as reference
to scheme up their investment policy.
The Moneymarket
So far the impact of stimulus reduction plan by the Fed was not felt in
the moneymarket. At least by Thursday last week [4/7] Rupiah exchange value
against USD at the interbank spot market Jakarta was still closed to stagnate
at Rp9,935 – Rp9,945, only Rupiah value against USD was last week [5/7]
predicted to weaken. The positive expectation. The positive expectation of
unemployment level in America was the trigger.
Rupiah weakening of last weekend was triggered by US unemployment data
being released which was posted at 188 thousand or higher by 161 thousand
compared to the previous 134 thousand. The same was with index of the service
sector which showed increase of sub-components. If they were combined it would
show bettered US unemployment data which bettered by 7.5% against the previous
7.6%. Accordingly Rupiah tend to weaken to the range of Rp9,930 – Rp9,975 per
USD.
The improved unemployment level in the USA increased probability of
execution of the Fed’s stimulus package reduction by the Fed on September 2013
next. The Fed had signaled that stimulus would be reduced if unemployment
lessened to 7% and stimulus would be completely stopped by mid next year.
Meanwhile if unemployment level lowered to 6.5% there would be consideration to
increase benchmark rate.
If unemployment level in the USA showed betterment of employment market
in the USA it would mean assurance of USD strengthening due to stimulus
reduction scenario. Non farm US payrolls was predicted to grow to 162 thousand
and would most probably be revised up to 170 thousand employment data in the
service sector strengthened.
Sentiment at the moneymarket would also be influenced by the meeting
outcome of ECB Central Bank and bank of England [BoE]. This was related to
market anxiety over the upjump of bond’s yield in Portugal. The market
responded to the remark of the President of ECB Mario Darghi to win back
market’s confidence in the Euro zone.
The political crisis in Portugal, triggered by resignation of the
Portuguese Finance Minister and Foreign Affairs Minister turned the Entire Euro
zone into an area of risk potential instability in the bond market in
combination with varied economic data. The market needed further clarification
from the Central Bank.
It seemed reasonable if USD strengthened against Euro during transaction
on Thursday [4/7] before ECB announced their monetary policy. Euro value
weakened against USD by 0.1% to USD 1,2991 from the previous USD 1,3003. Euro
values weakened against Yen by 0.2% to the level of Yen 129.63 investors were
expecting ECB to maintain interest rate at 0.5%. The market would also still
monitor the situation in Egypt as the military ousted Mohammad Morsi from his
Presidential position.
The president of ECB Mario Draghi questioned the political development
in Portugal, as political unrest had the potential to hindrance finance
austerity plan. Moreover the political crisis had caused bond yields to soar
up. The bond yield of Portugal for 10 years came to more than 8% for the first
time since November last year. So far USD ensured sound security supported by
positive economic condition.
At home, unpleasant news crept in as the World Bank last Tuesday [2/7]
axed Indonesia’s growth projection for 2013 to 5.9% against the previous 6.2%.
the trigger was among others global economic recovery which was slower than
expected and downturn of direct foreign investment in Indonesia.
The World Bank predicted that slowdown of Indonesia’s economy would only
happen in this year 2013 predictably to be 5.9%, and economic growth would
bounch back by 2014. The World Bank’s quarterly report had it that there was a
risk of worse slowdown. Downturn of the world’s commodity prices which kept
continuing would hold back Indonesia’s economic prospect due to high dependence
on income in foreign currency, profit of the business sector and investment
process. Prices of Indonesian commodities had generally had been reduced by
more than 20% against the highest price of 2011.
In other parts of the report it was stated that increased price of
subsidized oil which was notably high would help to lessen deficit of State’s
Budget 2013 which was estimated to save states budget by Rp42 trillion this
year.
While serving the growing need for imported oil amidst declining
domestic oil production, the reformation of subsidy plan was also an important
step to enhance social aid programs to help the poor people to survive for a
week or two. The government was hopeful to reduce poverty level to 9.4% by
2014.
The Government of RI projected economic growth at 6.3% this year, having
accomplished growth of 6.23% in 2012. The World Bank also predicted inflation
to be at 7.2% this year. Soaring inflation was reckoned to be the result of
increased oil price last week. The World Bank had been recommending the
Government to reduce oil fuel subsidy so the fund could be allocated for
development projects, education, and social aid.
Meanwhile the Central Statistics Board [BPS] announced inflation in June
was 1.03% and annual inflation was 5.90% [y o y]. This inflation level was lower
compared to inflation of June 2012. Inflation through calendar year
January-June 2013 was 0.32% while core inflation y.o.y was 3.98%. BPS also
reminded that increased price of subsidized oil would show greater impact in
time to come, especially in national inflation.
BPS also noted bad news that trade balance in May was showing deficit of
USD 590.4 million. Hence by accumulation, trade balance posted deficit of USD
2.53 billion. The deficit was due to import in May amounting to USD 16.66
billion, higher than export which was USD 16.07 billon.
By accumulation, deficit of trade balance came to USD 2.35 billion,
consisting of import USD 78.78 billion and export USD 76.25 billion. Deficit in
May 2013 was posted at USD 590.4 million due to deficit in oil gas trading USD
568.6 and deficit in oil gas was USD 21.8 million. Meanwhile deficit in oil gas
was due to deficit in crude oil trading USD 1.84 billion, whilst trading of oil
products was posting surplus of USD 50.7 million and gas was posting surplus of
USD 1.22 billion.
By accumulation deficit of USD 2.53 billion consisted of deficit in
oil-gas amounting to USD 5.11 billion and surplus in non oil-gas was USD 2.58
billion. Deficit in oil-gas was due to deficit in crude oil amounting to USD
1.51 billion and oil products USD 9.76 billion, while gas was posting surplus
of USD 6.15 billion. Surplus of gas was constantly posted, but was not enough
to cover up deficit in oil trading.
Good news came from BI who stated that the existing forex reserve today
was enough for financing rupiah stabilization effort. This was reflected in the
amount of forex reserves which was thankfully still was above international
minimum standard. In May 2013, Indonesia’s forex reserve was posted at USD
105.15 billion or down by USD 2.12 billion compared to the position in April
30, 2013 amounting to USD 107.27 billion.
The monetary authority would regularly ensure liquidity of foreign
currency by end of month and end of every semester. This was related to
increasing need of foreign currency for paying overseas debt of the private
sector and repatriation of corporate profit. So far BI had not stipulated
psychological limit of forex reserves which, as often mentioned by various
circles, that the psychological limit of forex reserves was USD 100 billion. BI
also did not set Rupiah exchange rate value at any level, because the most
important thing was monetary stability and state of national macro economy.
Although global economic uncertainty was still high, it was expected
that pressures on Rupiah value would be reduced in line with US economic
recovery. BI saw that the capital outflow going on today was but the habit of
hot money, which was commonplace amidst uncertain economic climate. The latest situation
showed that capital outflow tend lessen Rupiah exchange rate value which tend
to be relatively stable. By the above picture predictably Rupiah would
fluctuate in the range of Rp9,900 – Rp9,950 per USD with tendency to inch up.
The Capital Market
Signal of IHSG strengthening at the Indonesia Security Exchange [BEI]
was already visible during opening session last weekend [5/7]. Index
strengthened by 42 points, being driven by positive sentiment of the regional
stockmarket. Shares which were under valuated were again the investor’s target.
During pre-opening session, IHSG rose by 42.010 points [0.92%] to the
level of 4,623.943, while index of LQ 45 soared up by 10.699 points [1.41%] to
the level of 769.029. Furthermore to start session last weekend [5/7] IHSG was
opened to strengthen by 52.199 points [1.14%] to the level of 4634.132. Index
of LQ45 was opened to increase by 10.699 points [1.41%] to the level of
769.029.
Acts of net buying heightened since early session. All sectoral index
settled at the green zone with average strengthening of more than one percent.
A day before, [4/7] IHSG was closed to inch up by 4 points only, although it
soared p high enough before. Index was subject to profit taking toward closing
session.
No sentiment was reported from the New York stockmarket due to Fourth
July Independence Day celebration. Meanwhile stockmarkets in Europe were
strengthening significantly, responding to the ECB and BoE policy.
Asian stockmarket were simultaneously moving toward the red zone, being
driven by strengthening stockmarkets in Europe. Notable strengthening was seen
in some regional stockmarkets like Japan and Hong Kong. Index of Composite
Shanghai rose by 8.92 points [0.44%] to the level of 2,015.02. Index of Hang
Seng soared up by 286.29 points [1.40%] to the level of 20,754,96 index of
Nikkei 225 rose by 176.36 points [1.26%] to the level of 14,195.29. Index of
Straits Times strengthened by 21.28 points [0.68%] to level of 3,168.40.
Accordingly, IHSG was predicted to strengthen during last session last
week in line with positive sentiment at the regional stockmarket. IHSG during
closing session last weakened [5/7] was predicted to be in the range of 4.625 –
4.650.
Meanwhile stockmarkets in Europe strengthened, stopping downturn for two
days as investors were waiting for the announcement of interest rate level of
ECB and BoE. Index Europe 600 strengthened by 0.6% to the level of 287.22. Index
of Standard & Poor’s 500 rose by 0,2% while index of MSCI Asia Pacific
increased by 0.4%.
Europe stockmarket was having moderate increase during opening session
as investors reacted to Asia’s recovery. Economic projection by Bloomberg had
it that 61 out of 62 economist estimated that ECB would still not change
benchmark rate.
It was noteworthy that there was no positive sentiment from the domestic
side; even economic projection being axed by the World Bank turned out to be
bad news. It was not an exaggeration to say that BEI authorities regretted
candidate emitents’ decision to postpone IPO while they had spent sizable amount
of money in the process.
However BEI left it all to the candidate emitents’ decision because as
authority of the capital market BI was in no condition to interfere about IPO’s
execution. The only thing was BEI would continue to convince would be emitents
that the domestic stockmarket industry still had room for growth, which means
that IPO might bring maximum profit.
BEI was in no condition to interfere companies in terms of their
corporate acts. BEI could only give a picture of the condition of domestic or
overseas stockmarket. Through 2013 IHSG in BEI still posted growth of around
9.54%. Perhaps there was worries of the companies who suspended. What BEI could
do was to convince companies that the domestic stockmarket still had the change
to grow positively. BEI believed that the zest for IPO at home was still high.
According to the Financial Service Authority [OJK] record, companies
which were qualified for running IPO were PT Multipolar Technology Tbk and PT
Victoria Investama Tbk. Also PT Bank Maspion Indonesia Tbk, PT Cipaganti Citra
Graha Tbk and PT Bank Mestika Dharma Tbk And PT Bank Mitra Niaga Tbk. It was
certainly regretful if companies postponed their IPO this year amidst the
growing trend of companies doing expansion.
Movement of the stockmarket today was fluctuative in line with the
growing external negative sentiments. However, it was advisable for investors
to observe the condition of emitents in Indonesia which were in fact still
notably good and allowed enough room for growth. This year the stockmarket was
still fluctuative, but one thing was inevitable.
As known, PT Bank Muamalat Tbk had decided to postpone IPO considering
the restless market condition and still showing downturn. However this
corporate act would be continued as soon as the market was stabilized and
investors were reassured.
The negative reaction to government’s indecisiveness about increasing
fuel price, pressures on Rupiah due to foreign capital outflow and anxiety over
soaring inflation, made investors reserved about investing in the stockmarket.
However, investors had Indonesia economy was more focused on domestic demand.
Household consumption constituted more than half of Indonesia’s GDP.
Not less notable was consumer’s confidence level which was predicted to
be stable in the next few months. Government’s expenditure which was bigger
toward 2014 election could contribute to growth process. So broadly speaking
Indonesia must be more adaptive to continuing economic pressures as indicated
by slowdown of growth in the first quarter and lessened domestic demand as well
as oil price increase and social aid.
Furthermore the US Central Bank’s plan to end their bond buying by 2014
had triggered wide selling spree of assets of the emerging market, which forced
BI to increased BI rate in adaptive effort to external winds of change.
Although monetary and fiscal policy had been quite responsive to
circumstances, other pressures had mounted up which called for readiness for
further adjustment to secure micro and macro stability and maintain the
momentum of Indonesia’s economic growth. Price increase of subsidized oil a
great reformation would help to minimize deficit of APBN 2013 State Budget with
projected savings of Rp42 trillion this year.
While trying to meet demand for imported fuel amidst downturn of
domestic oil production, the reformation in oil pricing was also an important
step to increase funding for social aids to help the poor to survive. Poverty
level would hopefully be lessened to 9.4% by March 2014.
The protect the poor families from high oil price was the government’s
main priority and therefore a compensation package plan was designed to make
than plan to be more overall, integrated and well targeted. That was the
essence of Special Compensation plan including the People’s Temporary Direct
Aid Plan [BLSM] fr 15.5 poor families in Indonesia for period of four months.
BLSM should be designed to extend aid which was appropriate, timely and
effective for the poor families who were injured by oil price increase.
Broadly speaking Indonesia’s economy would only slightly slowdown this
year but run back to normal by 2014, in spite of slowdown risk in Europe. A
continuous downturn of world’s commodity prices might darken Indonesia’s
economic prospect due to their become in USD, profit of the businessworld and
investment activities. A price of most of Indonesia’s main commodities had
dropped and was now at 20% lower compared to the highest price level in 2011.]
Noteworthy was the statement of the Ministry of Finance M Chatib Basri
that slow investment could not be driven by Government expenditure, as the
portion of Government expenditure was extremely small. Minister Chatib said
that Government expenditure could not be relied on to spur on economic growth
as the Government’s portion was small. The Government’s share in contributing
to national GDP was small, i.e. around 9%; so it could not be expected that
growth propeller would come from the Government.
Today, the investment that could be expected to propeller economic
growth was from the private sector 25% and domestic consumption 55%. For that
matter the Government must scheme up a sound strategy to draw investment,
whether local [PMDN] of foreign [PMA] among them through simplification of
permi application procedures.
The most important thing was that the Government was determined to jack
up economic growth still above 6%. The revision of growth projection by the
World Bank should serve as motivation for the Government to proven that the
World Bank could be wrong. (SS)
Business News - July 10,2013
Business News - July 10,2013
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