Increase of BI rate by 25
basic points from 7.25% to 7.5% last week by Bank Indonesia posed as problem to
both Rupiah value and IHSG index this week.
Increase of BI rate brought pressures on the real sector
and banking sector. The signal flickered by the monetary authority was clear :
that BI wished to cool down economic growth for the sake of taming inflation
and Deficit of Current Account which was still wide. So increase of BI rate was
justifiable.
The overshadowing external factor was Tappering Off plan
by the Fed in the USA. When the plan would be released had been the argument
over the past quarter. The point was whenever the plan would be released the
negative effect on the market would be small as the market had been taking
adaptive measures [price in and price out] of the plan.
The Moneymarket
Rupiah value was still weakening against USD by early
transaction last week [15/11]. Rupiah inched down by 0.09% to Rp11,555 per USD.
Rupiah weakening happened when USD tend to weaken against currencies of the
Asia Pacific region which was on account of weakening US economy.
Candidate for the next Federal Reserves Governor Janet
Yellen stated that the US economy was now “strengthening significantly” since
the global crisis of 2008, but support by the Central Bank was still needed.
Janet made this statement last Thursday [14/11] before the Banking Commission
of Senate, where critics of the Republic Party set hard questions over the
large scale support by the Fed to US economy and Janet’s support in the past to
policy of that sort.
If the succession was confirmed at the Senate Plenary
Meeting, Yellen would be the first woman who would lead the Fed which was already
100 years old to replace Ben Bernanke who would resign in January 2014 next.
Yellen stated that US economy “had made satisfactory progress” since the deep
recession which was the worse recession in seven decades. It was noted that
America had created 7.8 million new jobs since 2010 while housing and
automotive industry were also strengthening.
However the 67 year economist said that America’s economy
was still “in its long journey toward regaining the attainments lost during
crisis” while striving to enhance employment. Evidently US President Barrack
Obama had decided to completely suspend implementation of the Law of Health
Insurance which was suspended for another year.
Speaking at the White House after his Government was
struggling with issues of unkept promise, again Obama had to apologize to 5% of
US citizens who could not have their health insurance policy due to the new
Law. Now insurance companies could offer options to the insurance holders to
renew their old insurance policy, but they were not obliged to do so.
President Obama admitted that his Government had failed
to start registration of the Obamacare plan and admitted the need to ragain
credibility from the American people. Obama said that in spite of the so many
failures he would not listen to grumbles of some legislative members who
“shamelessly” attacked the health insurance policy.
Previously Head of the US Parliament of the Republic
Party John Boehner said that the American people could not let the Obama
administration “destroy” the best health service system in the world. This
polemic was certainly not good for the USD which was under the pressure of
other world’s strong currencies.
The fact was that Rupiah was still weakening during
transaction last Thursday [13/11] when it inched down by 0.7% to Rp 11,67 per
USD. This was close to the lowest level in the last 4 years, i.e. Rp 11,680
posted on September 30 last. The downturn occurred when BI increased their
benchmark rate. This triggered the speculation that the released trade balance
only showed little improvement against deficit in quarter II which reached the
highest record.
As known, on Wednesday November 12, 2013 last, meeting of
BI Board of Governors decided to increase BI rate by 25 bps to become 7.50%
with Lending Facility and Deposit Facility to become 7.50% and 5.75%
respectively. The policy was applied considering high DTB amidst the risk of
global uncertainty.
Hence the decision was made to make sure that
DTB was lowered to a healthier level and inflation to be controlled at 4.5% +
1% in 2014 whereby to support continuity of economic growth. In the future BI
observed some risk in global and national economy and to enhance monetary
policy mix and macro-prudential policy. BI would also foster coordination with
the Government particularly in controlling inflation, deficit of current
transaction and efforts to improve national economic structure.
Economic growth of Q-3 2013 slowed down according to
previous estimate. Indonesia’s economy in Q-3 2013 grew by 5.6% [ y o y ],
slower than Q II 2013 at 5.8% [ y o y ]. Economic slowdown was mostly seen in
investment and declining investment and slow growth in non building investment.
Real export performance was showing improvement in spite
of being followed by increased total import. Meanwhile consumption household
and Government consumption alike were showing betterment. BI rated that
economic slowdown was inseparable from the stabilization policy of the
Government and BI pursuit of healthier economic growth.
Based on development till Q III – 2013 BI still predicted
economic growth 2013 in the range of 5.8% - 6.2% to step up to the range of
5.8% - 6.2% in 2014.
On the external side, development of Indonesia’s Balance
of Payment in Q-III-2013 was still in deficit, which was predicted to be
reduced to USD 8.4 billion in Q III-2013 compared to near USD 10.0 billion in
the previous semester.
Improvement was mainly seen in surplus of non oil gas
commodity trading [fob] with downturn of non oil gas commodity importing due to
decreasing local demand. Besides, deficit in balance of income also contracted.
However deficit in oil gas trading continued to expand as domestic production
dropped and import of oil fuel for domestic consumption was still high.
Meanwhile surplus in Capital and Financial Transaction Balance
Sheet as impact of inbound capital and portofolio investment slumped due to
uncertainty of the global moneymarket which was still high.
Forex reserves was posted at USD 97.0 billion by October
2013, increasing by USD 1.3 billion
against the position of late September 2013 at USD 95.7 billion, which was
equal to 5.5 month of import or 5.3 month of import and payment of Government’s
overseas debts. BI felt that this amount was safe enough to be at international
standard adequacy ratio and strengthen national resilience.
Rupiah exchange rate value in October 2013 was notably
stable to move according to the fundamental condition. Rupiah by point-to-point
strengthened by 2.73% [m t m] to become Rp11,273 per USD but on the average
weakening by 0.14% [m t m] to become Rp11,343 per USD. The development was
influenced by the condition of global moneymarket in October 2013 which was
satisfactory and lowered expectation of domestic inflation which in turn
attracted inflow of foreign capital to the domestic moneymarket particularly
SBI and SBN.
The pressures of eased inflation continued on October
2013. IHK Consumer’s Index in October 2013 was posted at 0.09% [m t m] or 8.32%
[y o y] which indicated that inflation had returned to its monthly pattern. The
eased inflation originated from food group, while inflation of administered
prices and core inflation was still stable. Core inflation which was stable
[4.73% y o y] was among others influenced by external pressure in line with
global food prices was on thr downturn.
To end transaction last week [5/11] was under strength
test at around Rp11,500 – Rp11,600 per USD. Speculations over follow up of US
stimulus program tend to weaken USD against currencies of the developing
nations including Rupiah.
Statement of Candidate Governor of the Fed Janet Yellen,
who said that stimulus was still needed had held back USD downturn. The same
statement had also strengthened price of gold which had its positive impact on
currencies of the emerging market. This had enhanced Rupiah appreciation over
the week to the level of Rp11,400 – Rp11,500 per USD.
The Capital Market
Unlike Rupiah which was under pressures, IHSG at BEI last
Friday [15/11] was opened stronger by 21.54 points in tandem with Rupiah’s
cooling down. IHSG BEI was opened to increase by 21.54 points or 0.49% to the
level of 4,388.91. Meanwhile index of premium shares 45 [LQ 45] inched up by
5.50 points [0.75%] to the level 734.40.
IHSG had managed to continue strengthening in tandem with
eased Rupiah unrest and bond market. Strengthening of BEI was due to the
condition of global stockmarket which tend to be positive as monetary stimulus
by the Fed was still to be continued. Yellen, who strongly supported stimulus
with expectation of US interest rate to be increased in 2017 against the
previous expectation of 2015.
IHSG had the potential to continue strengthening during
closing session last weekend [15/11] in the range of 4,400 – 4,450 although
increase of BI rate was still the main hindrance. During transaction on
Thursday [14/11], IHSG strengthened by 65.48 points [1.52%] to the level of
4,367.37 with transaction value of Rp 4.6 trillion. Foreign investors were
booking net sale of Rp 155 billion. Market optimism after Janet Yellen signaled
to maintain stimulus would enhance stockmarket.
Meanwhile at the regional stockamarket, among others
index of Hang Seng strengthened by 238.46 points [1,05%] to the level of
22,887.61; index of Nikkei 225 rose by 258.12 points [1.74%] to the level of
15,134.54 and Straits Times strengthened by 7.99 points [0.25%] to the level of
3,198.92 while majority of shares in Asia were greening.
Indonesia’s stockamrket was predicted to continue
strengthening thanks to buying spree of some premium shares: blue chips or
second liner through this week in the range of 4,430 – 4,480; however there was
possibility that stock players would leave the market has they were waiting for
increased interest rate after increase of BI rate. Moreover increase of BI rate
was a hard blow, particularly to the property and banking sector.
During transaction in mid- last week [13/11], one day
after BI increased BI rate, price of property and banking share dropped. In the
afternoon session, IHSG was closed to sink by 61.08 points or 1.38% to the level
of 4,380.64. The majority of sectoral shares weakened, led by the financial
sector which slumped by 2.82% followed by the property sector which dropped by
2.78%.
Furthermore, the various industry sector slumped by 1.9%,
consumer goods reduced by 1.51%, manufacturing shrunk by 1.35%, mining slumped
by 1.22% and trading negative at 0.98%. The only thing that strengthen was
plantation sector 1.72% and infra-structure inching up by 0.61%. However if
stock players could understand that BI’ aim to increase benchmark rate was to
revitalize national economy, there was no reason for stockplayers to quit the
stockmarket.
They would continue to make transactions as usual as BI’s
intention was to stabilize economy. Moreover the Government also supported BI’s
plan to improve DTB and inflation rate so national economy would be strong and
sustainable.
Business News - November 20, 2013
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