This week marketplayers set their eyes on two main issues, domestic or foreign: inward, the effect of fuel price increase would be the focus of attention as the policy would trigger inflation and have its direct impact on BI rate.
Outward statement of the Fed’s Governor Ben Bernanke about gradually
stopping fiscal stimulus till next year, was also being awaited for by
marketplayers to see if it had any effect on the moneymarket or stockmarket.
Unfortunately, the effects tend to be negative instead of positive.
In case of stockmarket, perhaps the good news was that emitent’s
financial report on effort to keep IHSG in good shape. Meanwhile Rupiah value
was anxiously waiting for Bank Indonesia’s step to stipulate monetary policy in
the post fuel price increase era.
The Moneymarket
During transaction in the moneymarket last week [28/6] Rupiah exchange
rate value against USD was opened to strengthen to Rp9, 920 per USD against the
position during previous closing session at Rp9, 935 per USD. As noted during
transaction last Thursday [27/6] Rupiah value at the inter-bank spotmarket
Jakarta was closed at the level of Rp9, 920 / Rp9, 930.
Rupiah value was entering phase of consolidation at the movement was
stop at rally. The USD rally was triggered by The Federal Open Market Committee
[FOMC] sometime ago which induced market fear of stimulus withdrawal by the
press this year.
However, speculation of bullish in USD and bearish in the emerging
market seemed to subside after verbal intervention by some of the Fed
officials. Apparently, Rupiah was closed at its strongest level Rp9, 920 moving
up from it weakest level at Rp9, 931 per USD.
One of the verbal interventions was by Narayana Kocherlakota, President
of the Federal Reserve Bank of Minneapolis who stated that withdrawal of
stimulus was still long ompared to marketplayers expectation so far. Until last
week the market was still waiting statement of other high officials of the Fed
like William Dudley, President of the Federal Reserve Bank New York and member
of the Fed’s Board of Directors Jerome Powell as the officials were important
figures as members of FOMC.
The Fed’s two high ranking officials could clarify the direction toward
which FOMC’s future strategy was headed for. Moreover USD was also under
negative pressures after the final version of USGDP was released, which was way
below the expected 2.4% i.e. only 1.8% for quarter l-1023. This data also eased
USD bullish, because negative US data means monetary stimulus by the Fed was
still needed so it was prolonged. The effect was negative for USD and on the
contrary good for currencies of the emerging economics.
Furthermore, form the Bank of China there was report which showed
notably positive figures. This condition was supportive to the magnetic appeal
of currencies of the emerging markets. Liquidity crisis in China was subsiding
which posed as positive sentiment to currencies in Asia.
The Brittish Central Bank [BoE] which stated that policy makers did not
have to reduce their monetary stimulus was rated as positive by developing
nations, which attracted foreign capital to flow back and uplift the currency.
In parallel with that data of US GDP which was below expectation eliminated
momentum for USD to rally. Report on US GDP growth was reported as dropping
which brought pressures on the currency.
However, chances of USD strengthening this week would be hindrance by
the negative effect of increased subsidized oil price. So the Government was
asked to watch on the potential of high inflation in July and August next.
Increase of subsidized oil price was believed to increase Government’s burden
and BI to tame inflation at 7.2% as targeted in APBN-P State budget 2013.
Until the third week of this month price increase was still reasonable
level. Increase was only in transportation cost which were varied around 15% -
30%. The impact of increased oil price would not be seen until June 2013 last
as price increase was announced toward end of month. However, by prediction
inflation would soar up in July in tandem with school holiday and Ramadhan
fasting month.
To meet inflation target of 7.2% through this year Government, BI, or
related parties had to work hard. The Government must make the best of months
which historically were recorded as time of low inflation like September to
start deflation. So far the Government had prepared some strategies to control
supply and demand.
It was noteworthy that increased price of subsidized oil did not reduce
public consumption of energy. Most people prefer to axe their household
expenses to meet their fuel need. They would rather reduce expenses for other
need than to reduce fuel consumption this was because public transportation was
felt as insufficient and inappropriate especially in Greater Jakarta.
The upper middles class would still prefer to use motorcars and
motorcycles rather than public transportation. As with the lower middle class
there would perhaps be some alteration, they would spend around the same amount
of money as before the oil price increase.
In that case it seemed reasonable if BI would again increase Fasbi and
BI rate to control inflation and simultaneously protect Rupiah. Last week end
[28/6] Rupiah moved in the range of Rp9, 930 per USD; through this week was
predicted to inch up in the range of Rp9, 880 – Rp9, 920 per USD being obstacle
by the Fed’s plan to tighten their monetary policy.
The Capital Market
Index of IHSG strengthened by 46 points, being uplifted by positive
sentiment from the global and regional markets. Buying passion of domestic
investors was till high. During pre-opening session last week end [28/6], IHSG
strengthened by 46.727 points to the level of 4,722.476 while index of LQ45
rise by 11.878 points [1.54%] to the level of 785.265.
During opening session, IHSG progressed by 68.285 points [1.46%] to the
level of 4,744.034. Index of LQ45 increase by 11.878 points [1.54%] Acts of
buying continued in spite of many shares strengthening in the previous session.
This time second tier shares took the lead in strengthened.
Increase of IHSG index was governed by Wall Street which was closed
positive on the third day, uplifted by positive US economic data. The Federal
Reserve Bank decided not to stop their stimulus program for the near future.
All in all stockmarkets in Asia gladly welcomed the good news from the global
market so their currencies were opened stronger against USD. Only China’s
stockmarket was corrected.
Index of composite Shanghai inched down by 17.08 points [0.88%] to
1,932.94. Index of Hang Seng rose by 109.94 points [0.54%] to the level of
20,550.02. Index of Nikkei 225 strengthened by 276.54 points [2.09%] to the
level of 13,490.09. Index of Straits Times increased by 25, 00 points [0.80%]
to the level of 3,143.03. Broadly speaking regional stockmarket responded
positively to verbal intervention by high officials of the Fed in regard to
withdrawal of monetary stimulus.
The stockmarket of Korea and Japan took the lead in strengthening of
shares last Thursday [27/6]. The market was expecting the Fed’s stimulus would
remain aggressive until next year. Index on Nikkei rose by 3%, Index of Kospi
rose by 2.9% and ASX Australia only rise by 1.6%. Index of Shanghai inched down
by 0.1%. It seemed that market anxiety which triggered acts of selling had
subsided. Data of US GDP in first quarter which was below target signaled that
the Fed would not reduce stimulus.
Data of South Korea current account surplus rose to make highest record
in May. The trigger was increased export in spite of global economic slowdown.
The data uplifted market trust. Meanwhile Australia’s market was responding to
domestic political change as Kevin Rudd regained the Prime Minister position
after outvoting Julia Gillard of the Labor Party at the election on Wednesday.
The market in Australia believed that change in the market was a positive thing
for business and consumer’s trust.
Generally speaking stockmarket index of last week was showing upgoing
trend, the way it was with MSCI Asia Pasific, MSCI Emerging Market, Europe
stockmarket, and US stickmarket. All the increased index was more on account of
US data on economic growth in Quarter l/2013 which was lower [1.8%] than
previous estimate [2.2%]; and was also the reason why Fed cancelled reduction
of stimulus by end of this year.
By the time Governor of the Fed announced reduction of US stimulus,
global shares were falling. At that time the Fed reasoned that US economy was
getting better, so stimulus needed to be reduced by end of this year until mid
2014. However the latest data showed that by quarter l/2013 US economic growth
was lower than estimated; which made global global shares bloom once more.
Index of MSCI Asia Pacific rose by 0.4% to become 126.73 in Tokyo. Index
of Topix Japan rose by 1% and Nikkei 225 Stock Average inched up by 0.7% and
index of Kospi South Korea rose by 1.8%. Australia S&P/ASX 200 Index NZX 50
New Zealand rose by 0.6%. Furthermore in Europe stockmarket shares strengthened
, while index of Stoxx Europe 600 rose to highest level in 2 days after
strengthening for 11 months amidst subsiding liquidity problem in China and
recovery of German consumers. The Stoxx 600 rose by 1.7% toi become 284.54.
In stockmarket of the emerging market, shares strengthened to the
highest level for nearly six months, but profit of bonds crumbled. Index of
MSCI of the Emerging Market increased by 1.8% to become 901.98, the biggest
rally since January 2.
The bettered global and regional stockmarket means silver linings to the
local stockmarket. In this case the Indonesia Security Exchange [BEI] was
reasonably satisfactory. The overseas fund was beginning to flow in again to
the local stockmarket in line with Moody’s Investor Service who promoted
Indonesia’s debt rating. Evidently during session on Thursday [27/6] IHSG was
closed to strengthen at 4,675.749. The highest intraday was Rp4,732.985 and the
lowest was Rp4,644.036. Foreign investors booked net buy worth Rp48.7 billion.
Pressures to sell which was happening in the domestic stockmarket had
pushed prices down deeply in some sectors which were regarded as quite
attractive shares at the moment; and yet shares of some sectors were valued low
which was relatively cheap with high return on equity compared to other
sectors.
There were at least four sectors which were probably noteworthy for
marketplayers, i.e. the mixed industry sector, finance, infrastructure and
manufacturing. Valuation of mixed industry based on price-to-earning ratio
today was in the range of 14,5 times with ROE of 23.49% PER of the Financial
Sector was 11.76 times with ROE 21.02%, PER of the manufacturing sector was
18.94 time with ROE 20.21% and PER of the infra-structure sector 18.95 times
with ROE 16.3%.
The PER of the four sectors were lower compared to the average PER of
all sector recorded at BEI, i.e. 19.66 times. Meanwhile the ROE of the four
sectors were higher compared to the average 10 sectors posted at 16.05%. it was
true that pressures to sell which happened at the domestic stockmarket in the
past one and a half month and corrected IHSG by 13.42% of the highest position
5,214 points on May 20. By year to date return booked at IHSG was only 4.6% so
PER IHSG today was only booked at 17.45%.
Meanwhile analysts rated that price of shares at the mining, finance and
infrastructure sectors were relatively cheaper after being corrected in the
past one month, as triggered by the Fed’s plan who planned to reduce stimulus
gradually till 2014.
In the past one month index of the trading sector dropped by 17.32%,
finance 16.15%, and infra structure 15.08%. The pressure to sell was predicted
to continue. For that matter investors were advised to choose shares of
potential growth and adopt a long term strategy.
Meanwhile investors of institutional business line like pension plan and
investment management were beginning to make transaction of shares which were
rated as relatively cheap. Pension plan institutions would increase shares
after correction was done on some shares. As known ROI of the pension plan
industry would increase if the shares they bought increased again.
So far correction on IHSG which was quite intense was not responded
reactively by investors, for example by making redemptions. By the time IHSG
was corrected, there were many insurance investors who were increasing their
investment. Moreover there were seven property emitent shares which were priced
below reasonable price against price-earning- per-growth [PEG] ratio. And yet
performance of property emitent shares had risen notably high by year-to-date
based on increased index of the property sector of 45%.
PEG ratio was valuation of a certain share based on market price under
transaction against income growth. If PEG ratio of a certain share was 1 X, it
means that the price of share was rated as reasonable. The lesser the PEG
ratio, the more prospective was the price of share provided that industry
prospect would continue to grow.
However, PEGF ratio was not too appropriate to be applied on property
sector but more appropriate to be used on consumption shares. In analysing a
share, it was necessary for investors to also observe company’s fundamental
condition. In addition to that investors must also be keen eyed to spot
opportunities that might pop up amidst the energized local stockmarket.
This was because there were four sectors which were also noteworthy to
investors, i.e. the sectors of mixed industry, finance, infrastructure and
manufacturing. The valuation of mix-industry sector was based on PER today
around 14.5 times as ROE i.e. 23.49%, PER of the Financial Sector was 11.76
times as ROE 21.02%, PER of the manufacturing sector was 18.94 times as ROE
20.21% and PER of the infra-structure 18.95 times as ROE 16.3%.
However, in the short term index movement would still be fluctuative,
although booking net buy. This was due to foreign consistency in drawing fund
from stockmarket through 22 days consecutively. Therefore, there was no
guarantee IHSG positive movement would continue, considering that market
sentiment, global or regional, was not supportive to jacking up index movement.
The only thing was, on last weakened, [28/6] IHSG was estimated to be
jacked up to 4,725 – 4,775 with tendency to strengthen. For this week, IHSG was
predicted to be still continuing strengthening within narrow space around 4,750
– 4,800 supported by projection emitent’s publication report which was well
guarded. (SS)
Business News - July 03,2013
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