RUPIAH AND IHSG STILL UNDER POLITICAL SPELL

By this week, political atmosphere would still govern the moneymarket and capital market attitude. In the post election period on April 9, 2014, people’s attention was focused on the process of coalition formation among political parties especially those on top three position.

The inter-party coalition structure was predicted to shape up during the Presidential election on July 9, 2014 next. It was presumable that if the candidating package was in line with market expectation, there would be chance for Rupiah and IHSG to strengthen.

The Moneymarket

Rupiah value at inter-bank transaction in Jakarta on Wednesday [16/4] last inched up by 4 points to become Rp.11,423 against the previous position of Rp.11,427 per USD. Rupiah’s strengthening process tend to be limited as marketplayers tend to be in wait-and-see position.

The election was an event of great importance as it determined where the course of Indonesia’s economy was headed for. The next Government was expected to adopt the right policy in securing domestic economic growth. On the other hand Indonesia’s moneymarket was still under the spell pf expectation of increased bank interest and Tappering Off policy by the Fed in the USA, although the domestic factor was not less influential.

As presidential election was approaching, Rupiah tend to move at limited range. Rupiah was consolidating against USD and tend to strengthen as Indonesia’s fundamental economy was signaling upturn like: controlled inflation and contracting trade deficit. This was made better by long week end last Friday which made duration of trade shorter.

For that matter by last Thursday [17/4] Rupiah would be in the range of Rp.11,400 – Rp.11,475 per USD with tendency to consolidate. Meanwhile over the week Rupiah would presumably move better in the range of Rp.11,350 – Rp.11,450 per USD after last week’s long weekend. The coalition map was shaping up toward Presidential election to give assurance to marketplayers.

The Capital Market

To start transaction on Wednesday [16/4] IHSG was opened to inch up by 21.421 points [0.44%] to the level of 4,886.984. Index of LQ45 was opened to inch up by 0.49% to the level of 877.845. US stockmarket bounced up after release of positive sales data. This morning index of Doq Jones Industrial Average was closed to inch up by +91% and S&P 500 was appreciated by +0.82%.

From Asia’s market, index in some advanced countries was also open to strengthen. Upturn in Asia’s market was signaled by Nekkei 225 in Japan which strengthened by +0.74%. Meanwhile index of Kospi Composite in South Korea was open to increase by +022%. At home, the market was appreciating announcement of candidates for 5 Vice Presidents of the winning parties.

AS coalition map was shaping up, it minimized political risk and brought positive sentiment to IHSG movement. The only thing was, toward long holiday investors were reluctant to transact so it was feared that the position of IHSG during closing session last Thursday [17/4] might have moved in the range of 4,875 – 4,900. This could be a good start for IHSG this week at 4,900 – 4,950 when long holiday was over.

IHSG BEI was safeguarded in positive zone, among other supported by inflow of foreign capital to the domestic stockmarket. Apparently inflow of foreign capital to the local stockmarket last Wednesday [16/4] as seen from act to buying was around Rp.344.526 billion. One thing was sure that today IHSG BEI was in the state of consolidation.

Technically, the handicap to BEI’s increased index was still relatively small. So the shares being recommended were among others: Bank Central Asia [BCA], Bank Negara Indonesia [BNI], Waskita Karya [WSKT], Unilever [UNVR]. Beside those shares, probably investors would also look at shares of Bank Mandiri and Bank Tabungan Negara [BTN]. This was related to the rumors about the decision of the Ministry of BUMN who finally designated PT Bank Mandiri Tbk to take over shares of Bank Tabungan Negara Tbk.

An official of the Ministry of BUMN stated that previously the Government had appointed Bank Mandiri and PT Bank Rakyat Indonesia Tbk as candidate buyer of BTN; but it seemed that Bank Mandiri was more convincing, so Bank Mandiri was chosen to acquire BTN. The bank selection process was very much determined by the offer made. The offer was among others the financing structure to support BTN capital after being acquired; but the offer was never specified.

As planned, the follow up process of BTN acquisition by Bank Mandiri would be stipulated at the Extraordinary Meeting of Shareholders [RUPSLB] of BTN and Bank Mandiri. In this case, decision would be made by minority shareholders. Besides the acquisition must be approved by the Privatization Committee.

Although this was a case of inter-BUMN acquisition, the take over was categorized as privatization. Today the Government commanded over 60 percent of shares at BTN. As the news spread out, shares under the BBTN code strengthened significantly and settled at Rp.1,395 per share or an increase of 9.84 percent against the previous Rp.1,270 per share. The Management of Bank Mandiri did neither deny nor confirm the case.

Unlike the BUMN shares which remained glorious, private shares needed investor’s attention. PT Bank Danamon Indonesia Tbk booked after-tax profit in quarter I/2014 at Rp875 billion, down by 16% against previous period at Rp.1.005 trillion.

The reduced net profit was on account of increased interest burden going up to 51% - such was because BI’s benchmark rate, which was today at 7.5%, was not being adjusted. The impact of profit-and-loss of the majority with cost of fund was that interest burden increased by 51% so in following quarters this bank would adapt itself in terms of credit interest.

The downturn was predicted to happen only in quarter I this year. He expected the downturn of profit would not continue to the next quarter of 2014. Meanwhile LDR credit which bettered became 94.1%; credit growth of 16% became Rp.136 tril­lion while total financing was went up by 22% to become Rp.139 trillion against quarter I of this year. Credit growth of Bank Danamon was reflection of a stable economy.

Inflation pressures had subsided, while other economic variables was within expectation, in line with the process of recovery among advanced na­tions. Bank Danamon's credit growth was attributed to credit growth of the mass market which consti­tuted 52% of the bank's total credit.

Credit of the mass market consisted of cred­it through Danamon Deposit & Loan IDSP1 to mi­cro businesspeople customers of Automotive credit through dira Finance and household credit through Adira Credit. By end of March 2014, credit of the mass market grew by 6% year-on-year to become Rp.70.4 trillion.

Meanwhile credit of the non mass market con­sisting of among others credit for small-and-medium business, commercial and wholesale, booked growth of 27% against same period the previous year to be­come Rp.65.5 trillion. Credit for UKM grew by 15% to become 21.3 trillion, while credit for micro business through DSP grew by 4% against quarter 1-2013 to become Rp.20 trillion.

On the external side, the Russia-Ukraina ten­sion and economic slowdown in China did not discour­age investors to invest their capital in the emerging market. At least nearly USD 2.5 billion of fund flew in to the emerging markets by early April, according to EPFR global data. This was the first backflow of capital since October 2013 last.

Re-entry of foreign capital signaled grow­ing appetite among foreign investors to invest their capital in the emerging market. Last January inves­tors were made anxious by the so called Fragile Five i.e. Turkey, Brazil, India, Indonesia, and South Africa. The central banks of the said countries were strug­gling hard to tackle currency exchange rate problem with the effect on the "walkout" of foreign capital. In many countries, investment was closely related to risk originating from political atmosphere.

Global investors were expecting the General Election in India, Indonesia and Brazil could lead to reformation which made economy more efficient. However, there was no guarantee that legislator can­didate or elected leader would be able to continue economic reformation. In general foreign investors were not fully rest assured about developing coun­tries, who were struggling a long way to solve their structural problems.

Generally speaking developing countries were rated as more risky due to higher political risk and very frequently developing countries were having volatility of commodity prices. However, by history economic growth was faster in developing countries due to growing middle class population. (SS)   

Business New - April 23, 2014