The year 2014 held the
potential of Rupiah strengthening while IHSG tend to elevate. The external
factor was the contributing factor to progress beside the domestic factor which
signaled positive indicator especially in terms of household consumption.
The IMF and World Bank signaled their optimism as US
economy was recovering while Germany and France were just as fortunate and
Japan managed to tame inflation to 0.7% last year against the targeted 2% and
would predictably be attained by 2016. China was growing positively although
still slightly below 8% - to be exact 7.7% last year.
The bettered external factor would uplift trade volume
which generated positive impact on national producing exporter. Non oil-gas
export was predicted to improve thanks to increasing global demand. All in all
emitent of the plantation and mining sector might expect to have windfall from
global economic improvement.
The moneymarket
USD again touched the Rp11,000 level after settling for
quite a long time at Rp12,00.- level. Since early last week [ 13/1/2014] USD
was traded at Rp11,830. USD stayed at Rp12,000 since December 12,2013 Meanwhile
the Jakarta Interbank Spot Dollar Rate [JISDOR] issued by BI on December 12,
2013 was at the level of Rp12,005 per USD.
However, toward last week end the was a naïf forecaster
who pessimistically predicted Rupiah would be losing strength against USD due
to negative sentiment i.e. released positive US data in the form of NY State
Empire Manufacturing Index.
With addition of MBA Mortgage application and report of
Beige Book of the Fed there was more positive sentiment for USD and certainly
made Asian currency, including Rupiah, had the potential to weaken. The same
was with Euro which slightly slump due to release of increased inflation in
Germany and downturn of Italy’s Balance of Trade.
On the contrary US economic recovery generated positive
sentiment t the emerging countries since demand for goods from America would
soar up to bring export-based forex income [DHE] to developing nations. In
other words, dollars would pour in grater amount which increase forex liquidity
and indirectly jack up Rupiah value.
In that case last week end [17/1] Rupiah should have been
at the level of Rp 11,750.- Rp 1,850 with tendency to strengthen. Moreover
during morning session, Rupiah at the spot market inched up against closing
session on previous day. Rupiah strengthening occurred when USD was seen to
weaken against most currencies in Asia Pacific.
USD sank against Yen after US Government data inflation
in Consumer’s Price Index [CPI] was still above the 2% target of the Federal
Reserve. The data supported The Fed’s plan to maintain bank interest at lowest
level. Consumer’s Price Index grew by 0.3% in December 2013. While core
inflation at CPI only inched up by 0.1% due to downturn record in medical
commodities prices.
Governor of the Fed Ben Bernanke last Thursday
[16/1/2014] said that the US Central Bank was well prepared to anticipate risk
from their Tappering Off plan including the risk of high inflation and asset
bubble. In his statement 2 weeks ago before ending his office in the Fed,
Bernanke denied accusation that he was provoking inflation by adopting easy
money policy in the pas 5 years. Bernanke led the nation through crisis since
America’s Great Depression in the 1930’s among others by injecting enormous
stimulus.
Bernanke’s also stated that the Fed did not believe that
the shares and property market had been prosperous although last year both
posted significant growth. The Fed was developing all instruments needed to
manage bank interest, to tighten monetary policy even if balance of payment did
not change or expand.
Bernanke’s statement was related to quantitative easing
injection worth USD 85 billion for buying US bonds. This policy had suppressed
US benchmark rate to extremely low level in the long run. Meaning, the Fed was
running monetary policy normally to avoid inflation risk which was avoidable –
or other similar problems. Certainly it was always possible for the Fed to be
too late in increasing benchmark rate, but the fact was that now the Fed had
many monetary instruments.
Bernanke stated that inflation was not his focus of
attention day, considering that inflation and consumers price index were still
settled at around 1.5% through 2013. About the opinion that there had been over
inflation of assets, Bernanke stated that the Fed was sensitive to financial crisis,
which in 2008 was triggered by bubble in property asset. However the Fed did
not choose to do control, regulation, and micro prudential approach to ensure
minimum risk.
To Bernanke, US economic growth had the strength to
control inflation which minimized workers’ mass dismissal beside increasing
consumer’s trust and brighten the growth prospect in early 2014. Low and stable
inflation was good for US economy. Furthermore by February 1 next Bernanke
would be succeeded by Janet Yellen, whose promotion had been approved by
Parliament.
It seemed reasonable for analyst to remark that Rupiah
was the “champion of losers” among falling currencies in Asia this year after
sinking deep last year on account of weakening economic resilence and widening
deficit which drew in USD. Rupiah was predicted to strengthen by 6.8% in 2014
to Rp11,400 per USD after weakening by 21% last year according to Bloomberg
Rankings.
Societe Generale SA predicted Rupiah to step up to
Rp10,250 by year end, much more than median estimate of 23 analysts surveyed by
Bloomberg, i.e. Rp12,200 per USD. Among top ten economy in Asia, only China’s
Yuan strengthened higher than Indonesia.
Indonesia’s Deficit in Current Transaction widened to
make highest record in quarter II/2013 at 4.4% against GDP which crumbled
Investors’ trust as the Fed announced execution of Tappering Off. Analyst state
that Rupiah was undervalued at Rp12,000.- Trade balance was recently quite
positive. Moreover Indonesia had better outlook against global growth which
supposedly contribute to export recovery in second half of this year.
Governor of BI Agus Martowardojo last week stated that
Rupiah would strengthen in the future against USD which was due to bettered
Indonesia’s economic condition. BI was constantly stabilizing Rupiah value in
accordance with national fundamental economy which supported economic
adjustment the controlled way.
Betterment of Indonesia’s Balance of Payment[NPI] with
lessened deficit in current transaction was supportive to Rupiah movement.
Optimism of the central Bank was not related to the implementation of Law
No.4/2014 and Government’s Regulation No. I/2014 on Prohibition of Exporting
raw mineral ores. Evidently this regulation was well accepted by the market and
the impact was strengthening of Rupiah.
The regulation to prohibit raw mineral ore issued by the
Government was accepted as fair enough by holders of IUP permit. The result was
that businesspeople accepted the proposal, thanks to clarity of rules and
application of incentives and disincentives.
However, the impact to export prohibition for raw ore
materials was downturn of export volume of raw ore materials in early 2014.this
was because miner operators were starting to scheme up new business in
compliance to the regulations, i.e. to build smelters. The effect was that
forex income was slightly reduced.
Other elevating factors to Rupiah was marketplayers’
positive response to the release of increased interest rate of deposit
insurance agencies [LPS] by 25 basic points to become 7.5% and news of
increased forex reserves of ASEAN nations including Indonesia. Indonesia’s
forex reserves per end of December 2013 reached USD 99.39 billion per USD. On
the other hand the beginning of application of export prohibition of raw ore materials
was not too negatively responded as there was dispensation from the Government
for exporter companies who were committed to build smelters.
Since then, yield of SUN Promissory Notes or Rupiah
especially Rupiah exchange rate based on Non Delivery Forward [NDF] of one
month tenure continued to strengthen from Rp12,200.- to Rp11,950 per USD. So
over the week Rupiah was predicted to move in the range of Rp11,750 –
Rp11,950.- per USD thanks to improved market perception of Indonesia’s economy.
The Capital Market
After being closed negatively last Thursday [16/1] IHSG
during initial session last Friday [17/1] was again struggling in the red zone.
IHSG sank deep to below 4,400. IHSG by 16.47 points or 0.37% to the position of
4,396.02. Notably 66 shares went up, 81 went down, and 56 stagnated, while the
total transaction value in this session was only Rp 438 billion. Over the last
day last week [17/1] IHSG was predicted to be in the range of 4,380 – 4,440
with players lurking to take profit.
The news that the World Bank gave pessimistic evaluation
on Indonesia’s economic growth and fluctuating Asian shares which were losing
steam in spite of being closed strong, motivated marketplayers to do act of
selling.
Supposedly IMF and World Bank’s estimate which was
optimistic about the projection of global economy generate positive sentiment
to domestic stockmarket. Demand for exported goods would increase which
improved performance of exporter emitents. So positive projection of commodity
prices especially CPO in this Wooden Horse Year encouraged some plam grower
emitents to spur on expansion.
An example was Indo Agri Resources Ltd. a sister company
of PT Indofood Sukses Makmur Tbk. [INDF] who planned to plant new plantations
in plam concession zones 10,000 ha and 14,000 ha. New plantation was expected
to expand existing plantations. So far total plantation area came to 270,509
ha. As planned most of the planting agenda would be executed this year.
Besides new plantations, Indofood Agri also was focusing
effort on increasing CPO production output and chain of product supply. Factory
expansion was to anticipate expansion of plantation areas in the future.
Indofood Agri still had the opportunity to plant in their concession zone up to
80,000 ha or around one third of the planted area. The potential of land
development also included sugarcane plantation area for sugar industry.
Meanwhile PT Provident Agro Tbk. [Palm] was analyzing
financing strategy in the form of banking credit facility to finance some expansion
plan this year such as development of CPO and refinancing of plantation in
Bengkulu and South Sumatra.
The mining industry sector had better prospect year
because the Minerba Lae only prohibited export of raw materials, while export
of coal was still permitted. All in all coal producer emitent ha better
prospect this year in line with China’s economic recovery as the biggest
importer of coal from Indonesia.
Economic recovery in the USA, Europe and Japan also
generated positive sentiment to non oil-gas exporters. Demand for garments,
textile and Textile Products [TPT] and footwear was constantly growing
especially to the USA and Japan. The construction sector was predicted to
improve in line with increasing demand, most likely to support infra structure
building of buildings, airports, bridges and toll roads.
BI’s benchmark rate which settled at the 7.5% level also
generated positive sentiment to the stockmarket. This would stimulate companies
to sell shares through IPO. So it seemed natural if this week IHSG strengthen
in the range of 4,390 – 4,460. (SS)
Business News - January 22, 2014
No comments:
Post a Comment