Ending of the Federal Open
Market Committee [FOMC] session on December 17 – 18 2013 marked certainty of
Tappering Off worth USD 85 billion per month by The Fed.
Certainty of Tappering Off by the Fed, i.e. reduction of
stimulus of USD 10 billion per month for the next 9 months brought assurance
for all of the world’s moneymarket. Predictably the market would make
adjustments to the Fed’s action. Rupiah would react, and so would IHSG.
In the short run there would be mild restlessness to
recover soon because certainty was there. In the mid and long term Tappering
Off would bring positive sentiment to the global moneymarket including
Indonesia.
The Moneymarket
Rupiah exchange rate value in inter-bank transaction in
Jakarta last Friday [12/12] tend to stagnate at Rp12,205 per USD, but the
Government stayed on the alert over any possible effect of the Fed’s
announcement of Tappering Off to the amount of USD 12,205 next January.
The Fed’s announcement of Tappering Off might bring
Rupiah value down to a disheartening lever for the short term. At this point it
would be necessary for BI and the Government to constantly monitor Rupiah
movement. Somehow this impact of stimulus reduction by the Fed would
predictably not as severe as before because now decisions were certain.
Tapering Off was something bound to happen but reduction
of stimulus would be gradual. Marketplayers were reminded not be over anxious
and over reactive to the Fed’s decision so negative sentiment would not injure
Rupiah. It was right for the Government to stay calm and focus more on efforts
to improve existing homework.
A long line of problems were waiting to be tackled, among
others dependency on raw materials and oil-gas, food resiliency, and deficit in
current transaction. In terms of Rupiah it would be necessary to control
capacity of foreign currency whereby to balance supply and demand. Other
anticipative step was to anticipate Tappering Off by the Fed, for which BI was
trying to solve by increasing BI rate to 7.5%.
BI felt sure that Rupiah exchange rate value which broke
through Rp12,000 per USD was safe because it was still supported by Indonesia’s
sound fundamental economy.
Australian Dollar inched down by 0.19%, Singapore Dollar
by 0.07%, China’s Yuan by 0.01% and Malaysia’s Ringgit by 0.1% against USD; but
Japan’s Yen inched up by 0.27%, followed by Korea’s Won by 0.1% and India’s
Rupee by 0.11%. Meanwhile Bi’s mid rate was set at Rp12,105per USD. According
to Bloombreg Dollar Index, Rupiah was appreciated by 0.01% to the level of
Rp12,105 per USD after sinking deep to Rp12,106 last weekend.
BI pled the market to stay calm as BI kept trying to
maintain monetary stability by making measurable intervention to keep forex
reserves at safe level. BI believed that prediction of some analyst who
mentioned that Rupiah was continuing to weaken as it broke through the critical
level of Rp 12,150 per USD was only speculation. However it should be borne in
mind that Indonesia still had homework which was not easy to do.
Indonesia’s economic challenges for the future was still
hard especially to recover balance of payment. The challenges was from the
external, i.e. the global cycle and internal problem which was structural. The
global economic landscape was changing, commodity prices were down while
Tappering Off was underway. The reserve process could increase interest level
of developed countries and trigger capital outflow which increased vulnerability
of Balance of Payment as deficit in current transaction was still on.
The current transaction which for eight quarters still in
deficit could suppress Rupiah which had the risk of increasing inflation and
finally hindranced long term sustainable growth. At the moment the process of
economic adjustment was underway although domestic demand was still strong
which tend to suppress current transaction.
US economic growth which was predicted to recover next
year would bring positive impact with the recovery of US export and increase
forex income from export which would strengthen forex reserves and increase
liquidity at home. There was no need to panick by Tappering Off, because flat
flew out was hot money which would be compensated by forex reserves from
export.
The Financial System Stability Coordination Forum [FKSKK]
also saw that Indonesia’s economy was ready to face all the external challenges
and was ready to anticipate all obstacles toward 2014. Hence last weekend
[20/12] Rupiah moved in the range of Rp11,900 – Rp12,100 per USD and would
continue over the week in the range of Rp11,750 – Rp11,950 per USD.
The capital market
Index of IHSG last Thursday [19/12] was closed to
strengthen by 35.69. points or 0.85 percent to become 3,231.98. Strengthening
of index was in line with the Fed’s action to axe stimulus to USD 75 billion
per month against the persent USD 85 billion per month.
The fed’s resolution to drum up foreign investors to
enter the stockmarket with net buying with net buying came to above Rp170
billion. Trade volume came to 4.421 share lots with transaction posted at
Rp4.46 trillion. At regional level, stockmarket in the Asia Pacific region were
posting increasing in line with Tappering Off execution in the USA.
Starting transaction last weekend [12/12] in morning
session, IHSG increased by 57.761 points [1.36%] to the level of 4,253.558 in a
rally at Asian stockmarket. Positive sentiment came from Wall Street which the
night before broke record as the Fed ran Tappering Off. Index instantly
increased to its highest position at 4,257.168 not long after trade opening;
broadly speaking index could still persist at positive zone.
Starting transaction last Friday [20/12] IHSG index was
open to inch down by 6.678 points [0.16%] to the level of 4,225.302. Index of
LQ 45 was opened to inch down by 2.133 point [03.30%] to the level of 703.310.
Index instantly fell to into the red zone since opening session. High rising
shares were released fro profit taking.
Asian stockmarkets were moving the mixed way. Many
marketplayers were reluctant to make transaction toward long holiday. Index of
Composite Shanghai rose by 2.74 points [0.13%] to the level of 2,130.53. Index
of Hang Seng weakened by 30.000 points [0.13%] to the level of 22,858.75. Index
of Nikkei 225dropped by 81.83 points [0.52%] to the level of 15.777.39 Index of
Straits Times strengthened by 6.72 points [0.22%] to the level of 3,076.95.
Shares of Wall street tend to end up flat as investors
tend to wait; but Dow Jones managed to move up to make new record, while index
of S&P 500 and Nasdaq were corrected especially due to technological
shares. Trade volume was thin, way below the average daily transaction. Many
marketplayers were securing their positions toward year end holidays.
During closing session on Thursday [19/12] Index of Dow
Jones rose by 11.11 points [0.07%] to the level of 16,179.08, a new record.
Index of Standard & Poor’s thinned out by 1.05 points [0.66%] to the level
of 1,809.60. Index of Composite Nasdaq lessened by 11.93 points [0.29%] to the
level of 4,058.14. Dow Jones once broke through highest intraday level ever at
16,194.72 while S&P 500 needed 3 more points to make a new record. Both
reference index had risen by more than 20% this year. The strengthening was
driven by stimulus from bomds given by the Fed.
At home, the Government’s plan to restrict export of raw
minery products as per early 2014 could serve as positive catalyst to the metal
and metal and mineral sector. With this restriction supply of mineral products
from Indonesia could lessen commodity prices. Some analyst rated that emitents
could reap profit from increase of commodity price while producing minery
by-products as well in accordance with to Government’s regulations.
Generally speaking investors responded positively FOMC’s
decision who decided to do Tappering Off per January 2014 next. The stock
market was not affected by FOMC decision since Tappering Off was only USD 10
billion per month which indicated that US liquidity was still sizable.
On
the other hand, today IHSG’s index level already reflected assumption of the
post Tappering Off period. By prediction, IHSG might reach 4,300 – 4,400 next
week. The Fed’s certainty would comfort and ease the market so soon or late
IHSG might stabilize toward 4,500 all through 2014 in spite of the General
Election. Company’s zest to enlist their shares at the Security Exchange
remained high so they could serve as motivators to all stockmarket players.
Business News - December 27, 2013
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