The Moneymarket
Rupiah value against USD at the inter-bank spot market
Jakarta on Friday [11/10/2013] managed to strengthen. The positive expectation
of emitents’ high performance was the catalyst, which was among others
stimulated by the prospect of negotiation between President Obama and the
faction of public Party in Parliament.
Most likely the Republic Party would consider the
proposal for elevation of debt ceiling, at least for four to six years ahead to
allow time for negotiation. Meaning lending capacity be increased over that
period. Accordingly, Rupiah tend to strengthen in the range of
Rp11,300-Rp11,400 per USD.
Rupiah also had support from the market which was
focusing attention on US emitent’s report in quarter III-2013. As America
escaped recession, assuming there was agreement between President Barrack
Obama, the recovery process of US economy might continue.
US emitents’ report had been projected to be positive
through quarter III-2013 because even the previous economic data had already
shown positive increase especially in US employment data. Better employment
data indicated increased profit in many companies in America. Evidently they
were expanding business and increased their personnel. For that matter company
profit in the USA were expected to be positive, enhancing market desire to go
for risky assets including Rupiah.
Rupiah also had positive sentiment from the statement of
China’s Prime Minister Lee Keqiang that China’s economic growth was expected to
remain settled at above 7.5% for 3 consecutive quarters. China also planned to
promote economic collaboration with Indonesia after meeting of China’s Prime
Minister with President SBY, all contributing to Rupiah stabilization process.
Last week data of US unemployment claim was released
which posed as negative sentiment for USD because the figures worsened to 374
thousand against the previous 308 thousand. Last weekend data was released on
sentiment of US consumers which weakened to 77.2 against the previous 77.5. For
information, rupiah value against USD last Thursday [10/10] was closed to
strengthen by 40 points [0.34%] to the position of Rp11,480/Rp11,500. The
closing also served as the strongest and weakest intraday at the level of
11,545.
Economists predicted that if America failed to pay their
debt, there would be hard blow to world’s economy. Investors would abandon USD
and change to other currencies while the stockmarket would be smashed as well.
Many circles were worried about what was happening in America, because it would
rock the boat. So far the US Congress and the US Government had not arrived at
any agreement in regard to passing of budget including the health insurance
plan know as Obamacare.
The good news for this week was announcement of the White
House spokesperson which said that US president Barrack Obama supported Janet
Yellen to be the first women governor of the Fed replacing Ben Bernanke whose
office would end next year.
Marketplayers responded positively to this, but the main
focus was still the case of shutdown and deadline for default. Yellen, who was
presently Deputy Governor of the Fed, was Obama’s favorite candidate to be the
Number One person in the Fed which had great influence on the US financial
sector and even the world.
Yellen was known to have worked with the Fed for long and
participated in scheming up economic stimulus program to again promote
employment and control inflation. Yellen’s first assignment when appointed as
Governor of the Fed was to decide when stimulus would be reduced and such was
what made the world’s finance sector to rattle. Economists and marketplayers
predicted that the Fed’s stimulus in the from of buying bonds worth USD 85
billion per month would continue.
Obama’s statement underscored anxiety in the USA and the
world about chances of default if political stagnation continued over the week
[17/10]. Obama planned to urge the Republic party to pass the Law which would
elevate debt ceiling and re-open the closed institutions but such should be
realized without coming to terms with Republic’s demand,
Spokesperson of US Parliament John Boehner instantly
rejected Obama’s proposition about short term solution which did not include
the Republic Party’s demand. Boehner stated that every elevation of debt
ceiling regulated by the Law must be followed by deficit reduction.
Debate between the two leaders things even worse. Now
both parties were scheming up prerequirements before negotiations could be
continued. Some Government institutions were having partial shutdown since
October 1 last. The US Finance Department predicted the Government would fall
into default unless debt ceiling was increased this month.
At home positive sentiment came by as the Government
planned to issue Promissory Notes [SBN] in foreign currency, also Syariah bond
or Sukuk in foreign currency for the domestic market. Release of bonds in
foreign currency at home was for the first time there ever was.
The objective was to absorb USD at home, an instrument
for such never existed. The plan would be executed by early November 2013. The
Government was expecting to reap around USD 500 million from this plan. The
target was not too high; today the Government was preparing the scheme up, including
all aspect especially in terms of Standard Operating Procedure [SOP].
In the recent development, a different opinion emerged
that Rupiah exchange rate today had reached a new equilibirium and positive for
increasing export and reducing import of less essential products. The present
position of Rupiah already represented Indonesia’s fundamental economy.
Currency strengthening was not always good for national
economy. Two years ago Rupiah was below Rp9,200 per USD which was really too strong;
credit was spurred on as people tend to borrow USD. A condition a such
indicated that people were not aware that Rupiah was on the downturn.
Other good news was that Indonesia’s forex reserves by
end of September 2013 was posted at USD 95.7 billion, an increase against the
position by end of August 2013 at 93.0 billion. The position of fores reserves
was enough for 5.2 months of import only the forex reserve was equal to 5.4
months of import.
The increase of forex reserve was thanks to the execution
of BI’s policy mix to maintain Rupiah stability and coordination with the
Government to lessen transaction of current account.
Confidence of the foreign currency market at home turned
stronger with activated and more balanced supply and demand of foreign currency
in the making of Rupiah movement. Besides, increase of forex reserve was also
due to Government’s initiative to issue State Syariah bonds in the form of
foreign currency as one of the sources of fiscal deficit financing.
BI was expecting that by 2014 deficit in current
transaction [DBT] could reach 2.5%-2.7% of GDP, by far lower than the deficit
in Semester I/2013 at 4.4% of GDP or USD 9.8 billion. Surplus in trade balance
in August 2013 showed that DTB could be lessened in the next few months.
Previously BI predicted in this quarter 3 DTB could be lowered to 3.4% of GDP.
In 2011 through 2012 Indonesia’s economic growth had been
moving too fast, while on the other hand the domestic industry had not been
able to maximize production so import was needed, creating DTB. The widened DTB
had worsened Indonesia’s fundamental economy.
A condition as the above weakened Rupiah value against
USD, although it was now synchronous with fundamental economy. Meanwhile in terms
of fiscal policy. The Government must be able to control prices of horticulture
products which had been the greatest contributing factor to inflation.
BI was also expecting the portion of spot transaction
still dominating the domestic forex market could be reduced in line with the
issuance of BI Regulation no. 15/8/PBI on Hedging to bank. BI expected that
spot transaction whose market share was 73% on the average could lower and the
SWAP transaction increased. In case of SWAP transaction, today the market share
at the domestic market was 21%.
The domestic forex market was still developing as
indicated by the condition of excessive demand of forex which was more
persistent, limited instrument or transaction. This was related to Rupiah
vulnerability against turbulence from internal or external direction.
The stipulation made by BI or the Regulation of the
Ministry of State Owned Companies no PER-09/MBU/2013 Transaction of Hedging of
BUMN released on September 25 2013 last, was expected to reduce bank costumers’
dependency on spot transactions to fulfil need of foreign currency.
Supply and demand of forex at the domestic market was
expected to be balanced because with activated non spot transactions, exporters
who were in possession of forex could enter and expect to continuously promote
domestic forex market. In PBI No. 15/8/PBI/2013 the hedging transactions on
Rupiah among others in the form of Forward and SWAP.
The hedging value of underlying transaction was in the
form of economic activities including debt payment in foreign currency,
import-export activities, and investment. As with nominal value of hedging
transactions, the highest value was nominal value of underlying economic
activities stated in the supporting record of activities.
There was also positive news that Japan was collaborating
with Indonesia to overcome market turbulence in anticipation of the Fed’s
decision of QE III, a policy which might trigger capital emerging countries.
Japan’s Deputy Finance Minister Mitsuro Furushawa stated
that Japan wished to increase limit of currency swap with Indonesia soonest.
Swap was securing step comparable to bank’s credit limit which enable countries
in need of fast dollars to obtain dollars whenever needed.
Tokyo had agreed to swap with Indonesia to the amount of
USD 12 billion last August; however Japan was now preparing to increase the
scale, but Furusawa was not willing to give the breakdown.
The plan to increase SWAP was in line with other
countries offering their help to Indonesia. Last September Japan had increased
the value of currency swap with India to the amount of USD 50 billion, another
Asian state affected by exodus of foreign capital. The aniexty cooled down as
the Fed postponed moratorium of their easy money policy last month. The
suspension eased down US QE monetary policy, however the Government of Japan
predicted the policy would be executed in the near future and they warned the
emerging market to anticipate early.
The plan to increase currency swap with Japan was when
China and Indonesia signed currency swap amounting to 100 billion Yuan. South
Korea would predictably also signed the same facility in the near future; hence
Rupiah value had the chance to strengthen in the range of Rp11,250-Rp11,350 per
USD.
The Capital market
IHSG index still strengthened to 4,534.63 after inching
up by 1.06% or 47.9 points during early trading session last Friday [11/10].
Trading volume was posted at 155.1 million shares worth Rp237.09 billion.
Strengthening during early session was supported by 123 shares which
strengthened significantly; another 4 shares slumped and 42 shares remained
unchanged.
Index continued to strengthen from the level at the
closing session last Thursday [10/10] at 4,486 to opening session at 4,523.92. Strengthening
of sectoral index was in the mixed industry sector. Meanwhile the stockmarket
in the USA on Thursday [10/10] strengthened as indicated by index of Dow jones
posting the best increase since December 2011.
Index of Dow Jones rose by 2.1% to 15,126.07 with support
of Boeing Co shares which rose by 3.8%. Index of Dow succeeded to break through
15,000 after being below that level 4 days ago. Index of S&P rose by 2.2%
to 1,692.56 with support of all industrial sectors including the financial
sector. Meanwhile index of Nasdaq rose by 2.3% to 3,760.75, the highest
increase since January 2 2013.
Strengthening was due to recommendation by a politician
of the Republic Party in House to temporarily extend deadline of US debt
Ceiling. House members agreed to allow time to negotiate debt policy; meanwhile
Asia’s stockmarket was having rally during trading last Friday [11/10]. Index
was in line strengthening of US stockmarket energized by house members to agree
on uplift of debt ceiling.
Index of Nikkei strengthened by 1.2%, index of Hang Seng
rose by 1.3%, index of ASX Shanghai rose by 1.4%, index of Kopsi rose by 1.1%.
the sentiment caused change of price. The main index of China was having
rebound after weakening during Thursday session [10/10]. Positive came from
Government policy launching currency swap with countries of the Euro zone. This
was an initial step toward Yuan becoming a global currency.
Bank Indonesia’s policy to maintain BI rate at level
7.25% was rated as a relief to IHSG to move to positive territory, emitent’s
performance being no expection. To some financing sectors like property, and
automotive, BI rate policy seemed to appear as no burden.
Somehow marketplayers must remain cautions in making
investment where IHSG was still fluctuative. Moreover weakening of Rupiah was
still continuing. Sentiment from BI was only short term, not much could be
expected for the long run.
As known, there were still some negative sentiment which
influenced the stockmarket although release of the Central Statistic Board
[BPS] in September showed deflation and surplus of trade balance. So last
weekend [11/10] IHSG was moving flat around 4,500-4,550.
Released BI’s decision to maintain BI’s rate at high
level accompanied by increased forex reserves contributed to IHSG betterment.
IHSG turned positive in line with blooming Asian stockmarkets. Yet only weeks
ago there was mounting fear of US stockmarket again weakened toward deadline of
October 17, 2013 which brought gloom to Asian stockmarkets including IHSG.
Now
the improving dialogue process between US Congress and Senate would bring
positive sentiment to the global, regional and local stockmarkets – as
indicated by increased index of Dow Jones, spreading out to Asian regional
stockmarket and finally IHSG in the range of 4,450-4,600 this week. Financial
performance of emitents through quarter 3 this year was predicted to bring
positive sentiment also to the local stockmarket.
Business News - October 18, 2013
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