RUPIAH AND IHSG STILL UNDER PRESSURE

Embarking on 2014, the domestic moneymarket would predictably still be under pressure. Unsatisfactory global and national economic performance was one of the reasons. This was not to mention act of profit taking by some investors at the stockmarket which influenced IHSG curveline over the week.

Rupiah was also still in the red zone due to lack of positive sentiment that injected the market. BPS announcement on real inflation at 8.38% and surplus in Trade Balance last November was responded positively by the market since the spectra of inflation was still lurking.

So if this week Rupiah and IHSG could stand at last week’s level, it should be regarded as good achievement; but naturally positive sentiment, from internal or external, was still needed.

The Moneymarket

Rupiah value against USD weakened during early session on Friday [3/1/2014] last. Rupiah was opened to slump by 0.11% to Rp 12,173 per USD. Furthermore Rupiah weakened by 0.23% to the level of Rp12,188 per USD. Not just Rupiah most currencies of the Asia Pasific region were having the same destiny.

Asian currencies were in adverse condition since global crisis of 2008. Many investors walked out of developing countries to make Asian currencies slump. One of the factors that triggered outflow of foreign currencies was Tapering Off by the Fed in the USA.

The currency which sank deepest in Asia was Rupiah, which posted worst weakening [26%] since year 2000. Next to Rupiah was Indian Rupee, which weakened for the third year. Weakening also happened to Thailand’s Bath which fell to the bottom since 2010 due to anxiety in current transaction and mounting political tension.

Meanwhile China’s Yuan rose to its highest level in 20 years in line with Government’s optimism in strengthening convertability to their Yuan. South Korea’s Won strengthened for the second year. Many analyst predicted Asian currencies would weaken against USD this year due to bettered US fundamental economy and improved economic data.

It was hard for Indonesia and Thailand to strengthen their currencies because the two countries would run election in 2014. In 2013 Rupiah weakened by 26% to become Rp 12,180 per USD, while Rupee slump by 11% to become USD 61.8363 per USD and Bahts dropped to USD 32.82 per USD. Meanwhile Malaysia’s Ringgit also dropped by 6.8% to become3.2825 per USD while the Philippines Peso dropped by 7.5%, the worst fall since 2008.

About Rupiah weakening, BI reassured that Indonesia’s overseas debt, Government or private, was still safe and far from adverse condition the way it was in monetary crisis of 1997-1998. The point was of the total debt due this year and around 80% already had support, and only 20% needed cash from the spotmarket.

Admittedly some debitors had to seek for USD in the moneymarket. Most of them sold their products to the domestic market so they did not have fund in foreign currency. But the amount was not significant, only around USD 444 million [as per November 2013] which constituted only around 20% of total amount due.

Economists warned the Government that DSR had broken through 40%. Meaning 40% of forex would be used for paying debt and only 60% would be used for productive spending. 80% of total debt due by end of 2013 was financed from various resources.

Firstly   forex  obtained  from  export  income  [DHE]

Secondly, loan from Pricinpal Office abroad for Foreign Investment [PMA] companies.

Thirdly, from roll over or restructurization. In the previous publication BI mentioned that overseas debt in October 2013 was posted at USD 262.4 billion, slowing down by 5.8% [y o y] or 6.7% [y o y] annually against pervious month.

Slowdown in growth percentage was posted in the public or private sector. The position of overseas debt of the public sector in October 2013 came to USD 125.8 billion or slowing down to become 0.5% [y o y] against the previous month of 2.1% [y o y]. Meanwhile the position of overseas debt was stable compared to previous month at 11.1% [y o y] or worth USD 136.6 billion.

Time wise, the composition of long term overseas debt remained stable and dominant in October 2013. Mostly consisting of long term debt, i.e. USD 216 billion [82.4% of total debt], whilst the remaining USD 46.3 billion [17.6% of total debt] was short term debt.

To keep Rupiah from nose-diving any deeper, BI had issued BI Regulation [PBI] No.15/17/PBI/2013 which would be effective as per February 3 2014. This regulation served as improver of stipulation related to hedging swap transaction to BI. The hedging swap transaction to BI was buying swap transaction in foreign currency against Rupiah, in the process of hedging transaction between banks and BI.

Provision of the hedging swap instrument for domestic marketplayers was BI’s effort to deepen domestic forex market where medium-long swap instrument was still limited. The objective was to minimize the risk of Rupiah exchange rate value and promote investment activities in Indonesia.

Some improvements regulated in PBI were among others on scope expansion of underlying transaction, extention of transaction tenor and settlement by way of netting, pricing, transaction mechanism and transaction documentation. By that improvement, hedging contract could be done for a span of 3 [three] months which was exercised through Hedging Swap Transaction to BI, the tenure being three, six, or twelve months.

BI would probably maintain BI rate at level 7.5% to prevent possible inflation; this was known after BI reported inflation of December was 0.55%. December inflation was higher than November inflation 2013 which was posted at 0.12%. Inflation of December was related to Chirstmas and New Year, but inflation was well under control, by [y o y] calendar it was 8.38%.

They only thing was that Indonesia’s Trade Balance posted deficit of USD 5.6 billion or equal to Rp 67 trillion. This was on account of high import of oil while export only grew thinly. Trade balance in November posted surplus of USD 776.8 million. This was supported by export amounting to USD 15.3 billion or increasing by 1.45% since October 2013 and import amounting to USD 15.5 billion, downturning by 3.35% in October 2013.

Total export of January-November was posted at USD 165.57 billion or down by 5.19%[y o y] while total import was USD 171.17 billion or down by 2.8% [y o y] and non oil-gas USD 130.13 billion or down by 5.19%. With the above picture, Rupiah value last weekend [3/1/2014] was expected to be in the range of Rp 12,100 - Rp 12,250 with tendency to inch down. However Rupiah would stand a chance to strengthen in the range of Rp 11,900 – Rp 12,100 over the week.

The Capital Market

During opening session of 2014, IHSG managed to jump up by 53 points to the position of 4327.265,179 shares strengthened, 94 shares stagnated. IHSG posted transaction of Rp 3.305 trillion from 2.273 billion shares traded.

Most of IHSG propeller sectors were losing steam, like the sectors of plantation, consumption, mix industry, property and trading. However the trading sector inched down by 0.5%. Positive sentiment from macro data, i.e. inflation in December was 0.55%.

Compared to November, inflation by year end increased slightly. Besides Indonesia’s trade balance in November 2013 again posted surplus. BPS calculation had it that trade balance in November 2013 came to USD 776.8 million.

However, IHSG was correted during second day 2014 of transaction due to acts of profit taking. The position of index which strengthened in 4 last transactions was setting duck to profit takers. During pre-opening session [3/1/2014] IHSG weakened by 29.550 points [0.68%] to the level of 4,297.715, while index of LQ45 was reduced by 7.610 points [1.05%] to the level of 715.906.

Nearly all indices of shares were corrected. Investors were beginning to take advantage of window dressing by emitents for profit taking. Previously IHSG jumped up by 53 points during initial session of 2014 [2/1/2014]. By this strengthening IHSG managed to return to 4,300.

Meanwhile Wall street stockmarket in New York, USA was having their first correction in 2014 as investors were starting to take profit from increased price shares since December. There was data which showed that unemployment claim in the USA dropped by 2,000 to become 339,000 claims. Lowered employment data was sign of bettered labor data in the USA which made the fed axe stimulus. Index of Dow Jones Industrial Average dropped by 0.8% to 16,441.35.

Meanwhile Asian stockmarkets were losing energy after bad news was heard from Wall street. Some stockmarkets were still closed in new year’s festive atmosphere.

Index of Hang Seng dropped by 294.05 points [1.26%] to the level of 23,046.00. Index of KOSPI inched down by 13.75 points [0.70%] to the level of 9.35 points [0.29%] to the level of 3,165.30.

Last week end [3/2/2014] act of profit taking would still accompanying local stockmarkets [BEI] amidst aggressive local and foreign investors hunting for shares since opening session. As known, since closing session in 2013 till last Thursday [2/1/2014]. IHSG was always closed in positive zone, but analysts warned to be cautious of index movement last Friday [3/1/2014].

They predicted that euphoria of IHSG increase would not last long. Index was predicted to weaken, predictably in the range of 4,270 – 4,340. What needed to be watched out was commodity based shares like oil, after price of oil dropped sharply by 2,98% to the level of USD 95.49 per barrel in line with increased US oil reserves and explorations of oil fields in Lybia.

The same was with tin-based shares which needed to be watched on. Because after dropping by 0.88% last Tuesday [31/1/2013] price of tin again dropped in early 2014 by 1.23% to the level of USD 22.074 per ton. This week even pressures on domestic stockmarket would still be strong so IHSG was predicted to be still in the range of 4,250. 4,350.

Unfortunately the sentiment from controlled inflation this year was not responded by the market as it was predictable. Probably the entry of four new emitents might invigorate IHSG. It was reported that BEI was welcoming arrival of companies who planned to run IPO in 2014.

The four companies were among others PT Graha Layar Prima [Blitzmegaplex], PT Bali Towerindo Sentra, PT Inter Media Capital [ANTV] and PT Eka Sari Lorena Transport. PT Bali Towerindo Sentra planned to release 15% of shares to the public and appointed Ciptadana Securities as underwriter and the fund would be used for running other business.

Meanwhile PT Eka Sari Lorena Transport which already planned to run IPO since 2010 was up till now not realized as they had no authorization from OJK. Lorena proposed once more based on another financial report, i..e. September 2013. Lorena planned to release shares to the public 42.7% at the most to 42.7% to 42.8% or equal to 750 million shares. The fund from IPO would be used for developing business, like buying new buses. (SS) 

Business News - January 8, 2014