RUPIAH AND IHSG WAITING FOR GOOD NEWS

Amidst ongoing process of Presidential Elec­tion on July 9 2014 next, Indonesia's moneymarket were waiting for good news which would be the cata­lyst for Rupiah and IHSG strengthening at the Indone­sia Security Exchange [BEI'.

So far, there had been no good news so Ru­piah was under pressure while IGSG was correction prone. Toward election, what spread out was nega­tive news about black campaigns by supporters of each candidate. Certainly the condition did not bring any positive impact on Rupiah or stockmarket.

On the other hand, corporate act by emitents was not seen to be massive enough to stockplayers tend to wait. Some stockplayers were feeling uneasy waiting for good news which unfortunately never came. So last week end [30/5] it would be hard for Rupiah to strengthen and so was IHSG at BEI.

More over the session that lasted for 3 days seemed too short. However if the condition at home was favorable toward election, there were chances that Rupiah and IHSG would strengthen this week.

The Moneymarket

During morning session last weekend 130/51 Rupiah value against USD inched by 0.13% to Rp11,618. Previously, Rupiah movement against USD tend to vary with tendency to weaken by last weekend [30/5] in line with strengthening of USD in spite of downturn in economic growth in America.

Although US GDP was revised down by 1%, index of USD or S&P 500 was still maintaining its up going trend. Jobless Claim which went down by up to 30,000 brought optimism to market prospect. Income and expenditure of American citizens in May 2014 was predicted to descend.

Supposedly by Wednesday afternoon [28/5] Rupiah moved in the range of Rp11,600 Rp11.650 per USD after strengthening to USD 11,550 per USD. No over-reaction to contraction of US GDP would keep USD up; so Rupiah value against USD was pre­dictably weakening due to negative sentiment from global economy.

The course of Euro was still downward against USD, especially after speculations that some leftist politicians could win in the election in Europe. This triggered anxiety that the climate would hold back ECB effort to restore economy in the Euro zone, and it would make rupiah to move flat.

Europe's currency, Euro, was having the big­gest monthly downturn in the last 4 months. Euro fell amidst ECB speculation to step up easing of stimu­lus this week. Positive sentiment came as US data would cause unemployment support be reduced for the first time.

Meanwhile Yen would be at the highest level in a bi-weekly cycle against USD, due to advantage in the stockmarket. Investors were still reserved to­ward speech of the Governor of the Bank of Japan Haruhiko Kuroda. Meanwhile Russian Rubbel was the best player among 31 leading currencies this month.

Euro changed slightly at USD 1.3636, a downturn of 1.7% last May, the biggest downturn since January. Euro did not change against Yen at 139.04 per Yen. Meanwhile USD stayed at USD 101.97/dollar against the previous USD 101.98/ USD.

In fact Rupiah still had enough amunition to strengthen, such as Government's step to issue promissory notes in Rupiah. For information, the Di­rectorate General of Debt Management issued Saving Bonds Retail [SBR] of serie SBR 001 for individuals or Indonesian citizens.

SBR 001 Bonds was distributed through 21 sales agents consisting of 18 banks and 3 security agencies. After a period of offering on 2 - 22 May 2014, the Dir. Gen. of Debt Management issued SBR 001. This SBR bond was an alternative investment instrument with attractive features for retail inves­tors.

Issuance of this SBR 001 bonds was based on Government's initiative to develop state bonds market through financing instruments and expansion of investor-based financing. Total volume of order for this SBR and serie SBR 001 until closing session was Rp2,3 trillion, and the fund obtained from SBR 001 sales would be used for financing of APBN State Bud­get 2014.

APBN State Budget 2014. Specification of terms and condition of SBR serie SBR 001 was: nom­inal issuance Rp2.3 trillion, date of distribution May 26, 2014, date of settlement May 30, 2014, due date May 20, 201 6 and fond of bond without letter, floating type of coupon with minimum coupon.

Coupon level for the first 3 months was May 31, 2014 to August 20, 2014 of which 8.75% origi­nated from LPS Deposit Insurance interest. The next coupon level would be adjusted every 3 months on the date of coupon adjustment until due date. Adjust­ment of coupon level was based on LPS deposit in­surance plus 125 bps. Payment of coupon was made every 20th of each month; the first coupon payment was June 20, 2014 the date of coupon validity date was February 21, May 21, August 21 and November 21.

Sales of SBR 001 had harnessed 9,944 buy­ers in 33 provinces, the most numerous SBR buyer was that of around Rp5 million to Rp100 million, the average purchase volume per buyer was Rp240 mil­lion. The total number of SBR 001 buyer in Jakarta was posted at 42.7% of total order while West In­donesia beside Jakarta came to 47.8% while Central and East Indonesia came to 9.5%.

Based on age bracket, most of the buyers be­longed to the above-forty category numbering 7,357 buyers. The sales agents appointed by the Govern­ment consisted of 18 banks, the undertaker being Danareksa Sekuritas, Trimegah Sekuritas, and Suc­corinvest Central Gani.

Pressures on Rupiah was BI's focus of atten­tion. To stabilize Rupiah, BI underscored the need for financial market deepening, to minimize Rupiah vola­tility. So far weakening of Rupiah was still within BI's expectation. The weakening tend to happen as many people were taking advantage of regional issues, presidential election and APBN State Budget posture as reference.

However, to anticipate high volatility, a more liquid market was needed so when there was inflow and outflow, fluctuation at the market was not too high. Each day forex transaction at the market came to USD 5 billion, inclusive of inter-bank market.

From the above picture, apparently Rupiah would be in the range of Rp11,590 - Rp11,650 per USD last weekend [30/5] and strengthen to around Rp11,550 - Rp11,625 per USD through this week.

The Capital Market

During early session on Friday last week 130/51 1HSG was open to increase by 0.22% to 4,996.7. However, further index reversed thinly to 4,996.7 Of 495 shares traded, 27 shares strengthened, 4 shares weakened and 464 shares stagnated. Seven of nine sectors listed at BEI strengthened with highest in­crease happening to various industry 0.55%. Two other sectors weakened with highest downturn hap­pening in agro-business 0.07%.

Predictably IHSG would break through the 5,000 level being supported by inflow which contin­ued. No notable pressure was seen toward chang­ing month. The positive catalyst was reckoned to originate from domestic economy data which were predictably good, to be launched this week.

Previously IHSG during transaction on Wednesday 128/5] was closed to increase by 21.653 points [0.44%] Meanwhile Index LQ 45 strengthened by 2.954 points [0.35%] to the level of 848.672. Foreign investors had not stopped buying shares. Un­til closing of transaction foreign investors were seen to make net buying worth Rp152.85 billion at the regular market and negotiations

Since early year until closing session last Wednesday, entering foreign capital came to Rp 41,4 trillion. Unfortunately domestic investors were busily taking profit which posed as hindrance to strengthen­ing of IHSG. Nine sectors could strengthen, except the minery sector which was trapped in the red zone. The plantation sector was the most sought after.

Meanwhile the regional stockmarket was still compact to strengthen at the green zone. The good momentum of Wall Street was well grabbed by mar­ketplayers. The majority if indices at the regional market moved positively during week end transaction last week [30/5]. Index of MSCI Asia Pacific inched up by 0.1% to become 142.27. Hence Asia's index reference toward highest closing level since Novem­ber last. Meanwhile index of Topix Japan inched up by 0.2%. Index of KOSPI South Korea inched up by 0.2%, index of S&P/ASX 200 Australia inched up by 0.1% and index NZX 50 New Zealand had not booked much change.

Generally speaking Asian stockmarkets were moving positively, triggered by some sentiments. Firstly, data released by Japan's Board of Statistics showed that inflation in Japan increased last April. Secondly investor's speculation that America's econ­omy was recovering in the past 3 years. Global econ­omy was gradually recovering, which brought senti­ment to stockmarket. The outlook of US and Japan's economy was generally showing significant signs of recovery as well.

So index of Nikkei 225 increased by 34.43 points [0.24%] to the level of 14,670.95. Index of Hang Seng strengthened by 135.73 points 10.59%] to the level of 23,080.83. Index of composite Shang­hai increased by 15.66 points [0.77%] to the level of 2,050.23. Index of Straits Times inched up 1.87% [0.66%] to the level of 3,275.93. Index of S&P 500 rose to the third highest closing record in the 4 lat­est trading session. Investors seemed to ignore data which showed contraction in US economy in the 1st quarter, and made a bet on the second quarter.

The new claim for unemployment sup­port went down more than predicted 2 weeks ago, showed that the US labor market was strengthening to give reason to investors to buy US shares. Data of the US Trade Department showed GDP in the first quarter was having contraction for the first time in 3 years although there were signals that economy was recovering mainly due to slower growth of stock, but it was a good sign for future growth due to increasing order of goods.

Index of Dow Jones Industrial Average [DJI] rose to 65.56 points or 0.39% to 16,698.74. The Nasdaq Composite [IXIC] strengthened by 22.87 points or 0.54% to 4,247.95 and Index of S&P 500 increased by 10.25 points or 0.54% to 1,920.03 , the highest daily closing level. Shares of Apple increased by 1.8% to become USD 635 after reaching USD 636.87, the highest level in 1 ½ one day after maker of iPhone announced to buy music streaming and Audio Beats equipment around USD 3 billion.

Data of BATS Global Markets had it that the volume of light trading with around 4.88 billion share lots were traded at the US stockmarket, way below the monthly average of 5.78 billon lots. Shares at the US stockmarket rose because index of S&P 500 built strength, supported by last round of merger activ­ity and the hope for downturn of ECB interest which stimulated investors' interest to enter market.

Head of ECB Mario Draghi stated that banks must be very cautious about any negative sentiment at the Euro zone. His comment increased specula­tions that banks were ready to lower interest to fight low inflation and low credit at the Euro zone. Lower­ing of bank interest had become some sort of non-conventional stimulus.

On the other hand, data of order for durable goods and US manufacturing surprisingly jumped up last April while consumer's trust last May was also showing optimism which supported the belief in on going rebound in US economic growth.

In view of the above, last week IHSG was predicted to move in the range of 4,990 -5,025 with tendency to strengthen slightly. However increase would continue this week in the range of 5,010 - 5,060 because nearly all sectoral index was predicted to strengthen. Besides positive catalyst was reckoned to originate from domestic economic data which was predicted to be positive to be announced this week.

But there were emitents specializing in log­ging and it processing which were predictably hard to rise this year as people's interest in using wood as raw materials for house building had declined. As known processed wood were today were outsmarted by other building materials like light steel.

Some emitents in this sector booked loss since 2011 and 2012. In the future the emitent specializing in wood processing sector must begin to an­ticipate the growing choice of other building materi­als which were more competitive than wood to avoid loss this year. (SS)

Business News - June 4, 2014