Perhaps market players were upset about government’s uncertainty and
procrastination about increasing price of subsidized oil. For over a year
polemics had been going on and on, discourses thrown hundreds of times, but
until today there was no sign of clarity when oil price increase would be
executed.
Market’s common sense is a natural process which believed that
indecision triggered worries which materialized itself in declining trust. It
came as no surprise that in the first five months of this year Rupiah value was
constantly under pressure way be low its own fundamental value.
Thankfully the stock market was not affected, as indicated by the fact
that the IHSG index at the Indonesia Security Exchange [BEI] still settled at
above 5,000 it seemed that negative sentiment tend to aim itself on Rupiah
rather than the stock market. However in not too distant future the government
was expected to be decisive about energy subsidy so the logic of economy cut
materializes itself well.
The Money market
On the opening session of the spot market in Jakarta last week [31/5]
Rupiah value was predicted to weaken. While waiting for the government’s
announcement of oil price increase, the market was also waiting for the release
of China’s manufacturing data. Last Saturday [1/6] China released the
government’s version of manufacturing data which [by estimate] dropped to 50.1
against the previous 50.6 therefore Rupiah showed tendency to weaken last week
end in the range of Rp9,800 p Rp9,840 per USD.
Furthermore if the data skipped down to be low expectation, it might
trigger risk aversion from risky assets like Rupiah to save haven like the USD.
China’s Government’s version of released manufacturing data might confirm
downfall of manufacturing which was previously released by HSBC which showed
contraction.
Besides, Rupiah consolidation effort was also related to market awaiting
position of Indonesia’s macro-economy data to be released on Monday [3/6] like
trade balance, import-export, and inflation. With the discourse o oil pricing
policy the inflation data to be reported by the Central Biard of statistics
[BPS] would no longer be relevant.
Last week data of US GDP was released to estimate early quarter l-2013.
The growth percentage was predicted to increase to 2.7% to 2.8% against the
previous estimate o 2.5% this would certainly have its positive impact on the
USD and vice versa and pose as negative pressure on Rupiah.
At that time data of US economy was still showing recovery so Rupiah
could be affected. In reality, US GDP was released to be slightly lower than
estimate to become 2.4% for quarter l-2013. Apparently Rupiah was more
influenced by China’s manufacturing data.
As footnote, Rupiah value against USD at the interbank sport market
Jakarta last Thursday [30/5] was closed to stagnate at Rp9,810 per USD.
Negative sentiment over US government’s plan to stop Quantitative Easing [QE]
by year end had its negative impact in the capital market in Indonesia, and
rupiah was no exception.
If the US government’s stopped the QE policy by year end, it would have
its impact on the capital market. Although capital inflow was effected,
Indonesia’s fiscal was still healthy as impact of the subsidized oil policy. By
controlling subsidized oil, deficit of trade balance caused by high oil import
could be minimized. On the contrary if there was bettered policy of oil
subsidy, pressures from oil importing could be lessened so trade balance could
be eased.
So even if the USA stopped their QE program, Rupiah value would be as
assumed by the government in their proposal to Commission XI of House, i.e.
Rp9,600 per USD, on condition that price of subsidized oil was increased. On
the other hand, the global economic condition which was still on the slow
track, had made safe haven currencies like USD to be the player’s target so the
value strengthened. It was a pity that positive sentiments form home, like
Indonesia’s economy which still scored growth, was edged aside by negative
sentiment from the external which suppressed Rupiah.
However, the Government’s plan to increase price of subsidized oil would
predictably pose as positive sentiment to the domestic exchange rate value in
the future. This step could lessen deficit of Indonesia’s balance of payment
which would bring positive impact on Rupiah. Besides, BI was still striving to
protect Rupiah value in accordance with Indonesia’s fundamental economy.
By prediction the market would also be oriented to the impact of oil
price increase, in this case inflation potential. BI’s Governor Agus
MartoWardojo stated that inflation caused by oil price increase might break
through 7.76% this year. BI’s projection was higher than the inflation target
by the government in APBN-P State Budget 2013 at 7.2%.
By BI’s calculation, inflation would reach 7.76% due to increased oil
price, but still saved by controlled food price. In detail, BI elaborated that
inflation in the future after oil price increase would be high. Consumer’s
Price Index [IHK] would rise from 4.5% to 5.8%. Inflation contributed by oil
price increase would be 2.66% so annual inflation would reach 7.76%.
BI’s inflation figure was inclusive of increase of transportation cost.
It was almost certain that public transportation would increase tariff in line
with oil price increase. Tariff of overland transportation would increase by
20%. Taxi fare would increase as well, moreover if price of LPG gas increased
it would boost inflation. However the inflation turbulence would only last for
2 to 3 months. By early 2014 inflation rate would be back to normal as before
oil price increase.
BI’s Governor Agus Martowardojo also predicted Indonesia’s Balance of
Payment [NPI] would improve in quarter 2/2013. The improvement was thanks to
betterment of export in the line with gradual recovery of global economy.
Import pressures would be eased in line with moderate domestic demand. There
would also be increase of capital inflow, especially in the form of capital
investment.
Previously BI announced Indonesia’s Balance of Payment deficit of USD
6.6 billion [Rp6402] through quarter one 2013. This was because the capital and
financial transaction which was previously expected to cover up deficit of
current transaction turned out to be deficit. The development signaled that
Indonesia’s total forex reserve by end of March 2013 would slump to USD 104.8
billion [Rp1,60 trillion]. The total amount of forex reserves was equal to
import cost and overseas debt payment of 5.7 months above international
adequacy ratio.
By BI’s data, by end of April 2013 Indonesia’s forex reserves was noted
to increase to USD 107.2 billion [Rp1,039,8 trillion] By early quarter ll of
2013, capital fow to Indonesia increased reasonably. This was driven by release
of global bonds. This was what made BI certain that Rupiah would be in the
range of Rp9,500 – Rp9,700 per USD all year through.
Based on data of the Central Board of Statistics [BPS] total export of
quarter l 2013 was USD 45.39 billion or down by 6.44% compared to same period
of 2012 at USD 48.51 billion. Meanwhile import of quarter l 2013 was posted at
USD 45.46, also a slump of 0.62% against same period of 2012 at USD 45.75
billion. The condition forced the government of RI to lower economic target
growth to 6.2% in 2013, down against the previous target of 6.8%.
By the above picture, Rupiah exchange rate value was projected to move
in the range of Rp9,780 – Rp9,830 with tendency to weaken.
IHSG during last session last weekend [31/5] was opened to strengthen.
This appreciation occurred after weakening the day before. During pre-opening
session last Friday [31/5] IHSG strengthened by 5.6 points [0.11%] to the level
of 5,135.247. The same was with LQ 45 premium shares which rose by 1.41 points [0.16%]
to the level of 859.168.
During early session, IHSG was opened to ascend by 14.07 points [0.27%]
to the level of 5,143.72 and index of LQ rose by 1.92 points [0.22%] to the
level of 859,168. Predictably IHSG would rebound after weakening notably by 1.4%.
Index during closing session of last weekend [31/5] was predicted to be in the
range of 5,155 with potential to strengthen.
Meanwhile the US stock market was closed to strengthen by 0.4% on the
average, although GDP data and jobless claims was worse than estimated and
worse than the previous period. The gloomy data was expected the motivate the
fed to continue their stimulus injection program. The stock market in Europe
was also closed to strengthen by 0.4% driven by bettered consumer’s confidence in
England and statement of the British Chamber of Commerce that England’s economy
would grow faster than estimated.
In Asia’s stock market, after significant correction early last weekend
was opened to strengthen, driven by expectation of pension plan in Japan which
would increase shares placements, also expectation of industrial output which
grew better than estimate.
Previously during transaction last weekend [30/5] IHSG was closed to
weaken by 71.05 points [1.37%] to the level of 5,129,647 foreign investors were
booking net sell in significant amount up to Rp1.43 trillion. Trade volume and
total transaction dropped, while domestic investors were booking net buy.
As Asian stock market diversified, moreover with steep downturn of Hang
Seng Index which was intercepted by weakening of US and European stock market
previously, held back IHSG’s upturn. Not less notable was sentiment from Rupiah
weakening which made market players lose zest to make transactions. So foreign
investors turned aggressive in releasing shares which made IHSG sink deeper.
As for this week, although there were technically signals of further
correction, there was always possible index sudden backflow which meant global
shares could bloom once more. For that matter investment were advised to watch
on the course of global shares. This week IHSG with the potential to
strengthen.
The only thing was that the chances for IHSG to strengthen could be
hindrance unless the government’s give clear signal about oil price increase this
first week of June. If market players were annoyed or upset, they could release
shares the massive way which would forces IHSG to nose-dive to bottom line.
Among the recommendable shares were shares of PT Ciputra Raya [CTRS], PT
Cement Indonesia [SMGR], PT Japfa Comfeed Indonesia [JPFA], PT Ramayana Lestari
Sentosa [RLS], PT Surya Semesta Internusa [SSIA], PT Bumi Serpong Damai [BSDE],
PT Bumi Resource Materials [BRMS], PT Pembangunan Perumahan [PTPP], PT Citra
Marga Nusaphala [CMNP], PT Multipolar Corporation [MLPL] and PT Global Land
Development [KPIG]. (SS)
Business News - June 05,2013
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