THE THAILAND EFFECT AND ELECTION FACTOR GOVERN RUPIAH AND IHSG

Political crisis in Thailand lately would over­shadow Rupiah curveline and local stockmarket. Sup­posedly the sentiment was positive for Rupiah and IHSG and BEI foreign investors walked out of Thai­land Indonesia would be an alternative destination for investors, direct or portofolio.

Meanwhile the Presidential election pro­cess was the public's focus of attention, especially the marketplayers. So Rupiah exchange rate value against USD, beside political euphoria and fundamental economy would be influenced by global sentiment.

Rupiah was once under pressure, when yield of SUN Government bonds of 10-year tenure rose steeply. Rupiah kept weakening in line with global trends till afternoon. Today, the risk of deficit widen­ing might lead to increase of price of subsidized oil.

Other notable point was the presidential-vice presidential candidate pair influenced economic devel­opment in Indonesia, especially at the stockmarket. The market would respond positively or negatively to election outcome: who would lead this nation for the next 5 years ?

Predictably world's economic development would improve, including that in Indonesia. Moreover today the development was showing positive sign. This was evident with reference to data of Foreign Direct Investment [FD1] Indonesia which for the first time in 2012 was on Top Twenty in Host Economies being on the 17^th position. In 2013 Indonesia rose to 4^th position.

The post-election era would have its clear impact on national economy, normally after election economy tend to grow higher. The condition was in line with new hope and renewed commitment. How­ever all depended on the policy to be adopted by the next Government.

As with the effect of Election 2014 on Indo­nesia's stockmarket, it was expected that the impact would be positive. Moreover the election event this year in Indonesia would be the biggest event next to India. Hence, it could bring good impact on Indone­sia's economy in the future.

The Moneymarket

Rupiah mid rate according to BI data was posted at Rp11,560 last Friday [23/5], weakening by 0.39% against previous mid rate at Rp11,515 per USD. Compared to mid rate of Friday the week be­fore which was Rp11 ,415 per USD Rupiah mid rate on Friday [23/5] fell by 1.27%.

Meanwhile according to data of Bloomberg Dollar Index, Rupiah value inched down by 0.22% to Rp11,556 per USD. Previously Rupiah exchange rate value again weakened to the level of Rp11,500 per USD. Rupiah in NDF transaction inched down by 11.2 points or 0.10 Rp11,520 per USD against previous closing at Rp11,508 per USD.

Meanwhile last Friday [23/5] Thailand's Baht inched up by 0.2% to continue strengthening. Baht strengthened by 0.43% to Baht 32.46 per USD af­ter announcement of coup 'd etat. Meanwhile against Rupiah, Bath was in the range of Rp355 per Baht, up against the previous Rp354. As known, Thailand's military commander General Prayut Chan-O-Cha pro­claimed he had taken over power amidst the unending political turbulence in Thailand announcement by the General was broadcasted on TV.

Perhaps unpleasant news for Rupiah was related to Indonesia's overseas debt fULN1 position which in March 2014 came to USD 276.5 billion [around Rp3,138.55 trillion] an increase of USD 4.4 billion against February 2014. Governor of BI DW Agus Martowardojo underscored that the Central Bank authorities would constantly attend to the debt problem although he assured that national debt ratio was still at safe level.

The Government's Debt-to-GDP ratio of 24% was safely under control. Apparently ratio of state promissory notes owned by foreign investors was in­creasing notably by 33% to 34% - and apparently it was still lower in 2011 which was 35%. The good news was that today's current transaction was rated as healthier. So there was no reason for Indonesia to be worried of this debt status. BI would constantly attend to this debt case and talk the matter over with domestic borrowers : banks, BUMN or private companies.

Amidst anxiety over up soaring private debt, PT Pertamina 1Perserol and PT PLN [Persero] Electric­ity Company had obtained permit from the Ministry of BUMN to issue forex bonds worth USD 6.3 billion. As planned Pertamina planned to release bonds in USD denomination at the value of USD 4.3 billion and PLN USD 2 billion. Accordingly Standard & Poor's Ratings Services gave rating of BBB + for Pertamina's bond issuing plan which was part of Global medium-term notes plan with total investment amounting to USD 10 billion.

Other rating agency Moody's Investors Ser­vice also gave rating of [P] Baa3 for forex bonds to be released by Pertamina with stable prospect. To quote Bloomberg, Pertamina was offering forex bonds of 30 year tenure with coupon being offered at 6.7%. Bar­clays, Citigroup, and HSBC had been appointed as sales managers of bond release.

BI's data had it that total private overseas debt in Q 1/2014 came to USD 145.9 billion, an increase of 3% against latest year-end position which was posted at USD 141.6 billion. Meanwhile non-bank BUMN debt was posted at USD 21.2 billion, down by 1.7% against USD 21.6 billion by year end last year, or 14.5% against total private overseas debt.

From the above picture Rupiah position dur­ing closing session last week [25/3] would be around Rp11,500 - Rp11,550 per USD over the week predict­ably Rupiah would strengthen to around Rp11,450.- Rp11,500 per USD.

The Capital Market

Index of IHSG strengthened by 0.09% to 4,974.32 in session I on Friday afternoon [23/5]. Index moved in the range of 4,969.2 - 4,977.55. Meanwhile index of LQ 45 strengthened by 0.193points [0.02%] to the level of 847.747. It showed that IHSG was consolidating before advancing to strengthen fundamental support. On the whole IHSG was fluctuative while gaining strength before ascend­ing to the next resistant level. Finally index stopped at 4,974 in afternoon session.

Previously IHSG began transaction to inch up by 3,660 points [0.07%] to the level of 4,973.542. Index was approaching the psychological level of 5,000 thanks to act of net buying. Index was moving in not-too-wide span. Foreign investors were hunt­ing for shares while some domestic marketplayers were making profit. Commodity and consumer shares supported stockmarket strengthening. Some bank shares which previously rose, were now released for profit.

Last Thursday [22/5] IHSG kept showing strength in line with dynamic stockmarket activities in the Asia Pacific region. Released index of China's manufacturing shares, which were at highest level in the past 5 months as well as Wal street data, brought positive sentiment to the stockmarket

IHSG strengthened by 59.59 points to the po­sition of 4,969.88. There were 207 which strength­ened, while 87 shares weakened and 84 shares re­mained stagnant. Trade volume came to 6.32 billion share lots worth Rp5.96 trillion. Foreign investors were booking net buy on this day which contributed to IHSG upturn.

Sectoral index were entirely strengthening, i.e. agro-business 0.89% , mining 1.62%, basic in­dustry 0.76%, various industry 1.19% , consumer 0.04%, property 1.01%, infra-structure 1.64%, fi­nance 1.88%, trading 0.97% and manufacturing 0.53%.

Meanwhile stockmarket in Wall Street, New York, was closed positive thanks to strengthening of second tier shares. Index of Nasdaq took the lead in strengthening with entrance of bio-technology shares. Entry of bio-technology shares was continu­ing fluctuative trend which had been happening latrely. Beside bio-technology shares, internet shares were also showing wide fluctuation.

Second tier shares were performing well, but the market was in need of better strengtening espe­cially with high risk shares. During closing transaction last Thursday [22/5], index of Dow Jones inched up by 10.02 points [0.06%] to the level of 16,543.08. Index of S&P 500 increased by 4.46 points [0.24%] to the level of 1,892.49. Index of Composite Nasdaq strengthened by 22.81 points [0.55%1 to the level of 4,154.34.

Asian stockmarkets were moving the mixed way. Positive sentiment at Wall Street was not well absorbed by regional marketplayers. Index of Nikkei 225 jumped up by 156.51 points [.09%] to the level of 14,494.30. Index of Hang Seng inched down by 17.44 points [0.08%] to the level of 22,936.32.

Index of Composite Shanghai inched down by 0.67 points 10.03%] to the level of 2,020.62. Index of Straits times strengthened by 7.92 points [0.24%] to the level of 22.936.32.

The stockmarket in Bangkok dropped by 1.44% as Thailand's Military Commander Gebneral Prayut Can-O-Cha announced his coup'd etat. Pre­viously the benchmark index in Thailand inched up by 0.2% after being closed before the coup was announced. The coup shocked investors who never thought the military would interfere with national poli­tics.

Thailand's image crumbled in the eyes of marketplayers. Most of the investors who played in Thailand were retailers who had the same experi­ence before. In spite of long and winding political crisis, Thailand's stockmarket had grown by 8.2% since early this year and even increased moderately during transaction two weeks ago before the coup was announced. Strengthening of index had been apparent although the Government had announced their economy had grown less in Q-1 of 2014. Economy slowed down due to setback in tourism and consumers sector.

As known the military of Thailand had taken over power and now the public were watching further political development which made struggle harder to restore economy. It was not impossible that Thailand might slip back into another crisis this year when eco­nomic growth was precicted to grow by not more than 2.1%.

It was noteworthy that foreign investors at BEI were consistently hunting shares in the past ses­sions. Since early year till last Thursday [22/5] for­eigners were seen to make net buying to the amount of Rp41.519 trillion.

The high inflow of foreign capital to Indone­sia's stockmarket indicated that the domestic stock­market was still dependent on foreign capital. This was understandable because Indonesia was one of the emerging countries where local capital resources was still limited. If all goes well in the election pro­cess, foreign investors would not hesitate to invest in Indonesia.

The news of improved manufacturing in Chi­na which progressed remarkably this May to reach highest level in the past 5 months, brought positive sentiment to IHSG. However, Government's support was still needed to ensure advancement.

The betted performance in manufacturing was seen in the purchase management index [PMI] released by HSBC which came to 49.7 this month a level which was the highest in the past 5 months. Last month. China's PMI level was at 48.1. The at­tainment served as driving force to stockmarkets in the Asia Pacific region.

IHSG at BEI last weekend [23/5] was predict­ably varied with the potential to continue strengthen­ing to 4,990 - 5,020 to anticipate transactions over next week which was relatively short as Tuesday and Thursday were public holiday. This was strengthened by positive sentiment from the external when index of Dow Jones Industrial Average continued strength­ening.

Over the week IHSG had the potential to strengthen in the range of 5,000 - 5,050, supported by market optimism related to news that election pro­cess would only be one-round. The only thing was for the short term market players tend to take wait-and­-see position after investing in high amount. Positive macro-economic data and reduced deficit in trade bal­ance, plus tamed inflation brought additional senti­ment to IHSG. (SS)

Business New - May 28, 2014