It might have been a
coincidence, but toward Presidential election on July 9, 2014 next. Rupiah
exchange rate value and IHSG at BEI were constantly under pressure. Apparently
the election seemed to generate negative sentiment, instead to positive
sentiment, to the market.
Perhaps political tension was heightening toward H-Day,
to make players nervous. Expectations that once buoyed high that the
Presidential election would bring betterment was gradually fading out due to
flaring support or attack by each back up team of both parties.
Market players were getting confused and passive as black
campaigns mounted. Some occurrence had even entered the legal domain as
grievances were expressed by people who felt they were disadvantage by the
accusations addressed to certain circles. In the end, market players took
wait-and-see position until final announcement of election outcome was made by
the Election Commission provided that both contestant accepted the
announcement.
Market were also trouble by oil crisis triggered by
political conflict in Irak. The outburst in Iraq would generate negative effect
to other parts of the world the way it happened many times before because Iraq
was one of the biggest oil producers in the world. The crisis in Iraq tend
uplift USD value as safe haven which would down press Asian currencies
including Rupiah
The Moneymarket
Rupiah in inter-bank transaction in Jakarta on Friday
morning [20/6] weakened by 20 points to become Rp 11,947 per USD against the
previous Rp11,935 per USD. Rupiah depreciation was due to market anxiety over
political tension in Iraq which was feared to boost up oil price and disturb Indonesia’s
trade balance.
The geo political factor would still over shadow the
money market in Asia. If the condition continued for a long time Rupiah would
slip back to weakening zone. However, sentiment from the Fed’s meeting [FOMC]
outcome on June 17-18 last which kept interest low at 0% - 0.25% was expected
ease pressures on Rupiah.
The geo-political factor and Resistance of the Fed’s
benchmark rate in the future would bring opportunity to assets in developing
countries including Indonesia which promised high return to investors. Players
of the money market could grab the opportunity to buy currencies of the
emerging markets including Rupiah.
Previously USD exchange rate value fell against other
currencies last Wednesday [18/6] as the Fed announced they would keep axing
purchasing program of bonds worth USD 10
billion. The fed also lowered extremely growth estimate of 2014, making
excuses that severer winter storm had caused US economy to shrink in
January-March last.
The fed estimated US economic growth to become only 2.1%
to 2,3% this year, descending by 2.8% to 3.0% in last projection last March.
The fed stated that indicators of the labor market were generally showing
further improvement while consumers’ expenditure was rising moderately but recovery
in the housing sector remained slow.
Green buck weakened because Janet Yellen, Governor of the
Fed planned to keep bank interest low for long time as the program of bond
buying ended. All in all, Euro’s value against USD increased to USD 1.3569 against the previous USD 1.3543
while British Pound sterling increased to USD 0.9369 against the previous USD
0.9336.
USD was worth Yen 102,09 lower than previous Yen 102.016.
USD also descended to 0.8978 Swiss Franc against the previous 0.8998 Swiss France,
and inched down to 1.0865 Canadian Dollar against the previous 1.0867 Canadian
Dollar.
Pressures on USD breezed out hope for Rupiah to
strengthen. This was already signaled in trading on Thursday morning [19/6]
when Rupiah exchange rate value strengthened by 63 points to become Rp11,933 against the previous
Rp11,996 per USD. Outlook of US economy which weakened served as catalysts of
strengthening at that time. Moreover word was out that America’s current
transaction widened to USD 111.2 billion in Q-1 this year and that was one of
the negative sentiments to USD.
Somehow Rupiah strengthening was still overshadowed by
conflict Iraq which boosted up world oil price. On the road hand, the
continuing crisis in Ukraina would jack up oil price. The condition in Ukraina
was still the cause of anxiety among investors at home because it could mean extra
burden for subsidizing oil price and
indirectly widen trade deficit and current account.
The opinion of analysts, market players and the Governor
of BI was in line with that of the Governor of BI Agus DW Martowardojo who said
that there were at least three factors which caused Rupiah to weaken, all
originating from the external. The first factor was geopolitic tension in Iraq,
which triggered anxiety over increasing oil price in the world. The condition
in Iraq might trigger outflow of shares and bonds which increased demand for
USD.
The second factor was meeting of the Federal Reserve or
Federal Open Market Committee
[FOMC] which warned that
inflation in the USA was on the upturn which caused market anxiety, and such
would accelerate the Fed Rate increasing process.
The third factor was economic development in China and
Europe a condition which influenced developing countries including Indonesia.
The influencing factor to Rupiah was seasonal buying of forex by retail
corporate which they needed for overseas payments, interest payments, dividend
payments, reparation, etc.
So it seemed right that toward MEA 2015, BI and the
Government pled the people and business people to quote their trading in Rupiah
in every transaction in Indonesia. ASEAN was often seen as Uni Europe, but the
Asean region could not be perceived in the same way as Uni Europe due to
difference in exchange rate value of each respective currencies. In Europe,
countries could use the common currency but in Indonesia such was not
applicable because each country had their own currency.
Soon when the market was more open, goods and services
flew in and out more freely. The capital market had no limit. So Rupiah had to
be strong and BI should encourage use of Rupiah in every transaction at home.
Indonesia’s market and business players had confidence in Rupiah, the
International community would trust just as much.
In Law no. 7/2011 on currency it was mandatory for Rupiah
to be used in every transaction in Indonesia, but the us of foreign currency
for transaction in some regions in Indonesia was still commonplace, and law
must be held up by law enforcers.
From the above picture, Rupiah was at the level of
Rp 11,900 – Rp 12,000 per USD during closing session last week [20/6]. Pressures
on Rupiah was continuing this week so Rupiah was project to move in the range
of Rp 11,850 – Rp11,950 per USD with tendency to inch up.
The Capital Market
From the above picture IHSG at BEI last Friday [20/6]
inched up by 11.29 points or 0.23% to become 4,875.57 being uplifted by
external factor, while index of 45 premium shares [LQ 45] inched up by 2.24 points
[0.27%] to the level of 822.77. Technical factors elevated BEI index where
markets players again accumulated shares which were corrected during
transaction on Thursday [19/6].
Amidst unstable stockmarket, marketplayers took to
adopting short-term strategy to keep assets from being enroded significantly,
in case assets moved in consolidation, so marketplayers would be selective
enough in choosing shares and BEI index tend to move the limited way around
4,855 – 4,905 in closing session last week [20/6].
Meanwhile some stockmarket in the region which
strengthened served as driving force to BEI index. Strengthening of the
regional Stockmarket was in line with statement of the Fed that US economy was
in recovery lane so most likely the Fed’s interest would be maintained at low
level for sometime ahead.
The Regional stockmarket, among others Hang Seng
strengthened by 32.75 points [0.14%] to the level of 23,200.48, index of Nikkei
rose by 14.66 points [0.10%] to the level of 15,375.82. However index of
Straits Time weakened by 2.66 points [0.14%] increase of IHSG was thanks to
selective buying which were corrected the day before. Unfortunately
strengthening of IHSG was in reserve to Rupiah which slumped.
Furthermore during closing of session I last Friday
[20/6] IHSG inched down by 8.646 points [0.18%] to the level of 4,855.627.
Meanwhile index of LQ 45 inched down by 1.583 points [0.19%] to the level of
818.945. Investors who were hunting shares joined the selling spree, but not
all shares sectors were corrected, such as shares in consumers, mix industry
and manufacturing sectors.
All quiet on the transaction front frequency of
transactions only posted at 82.990 times including 1.459 shares worth Rp1.613
trillion. 104 shares increased, 125 went down and 72 shares remained stagnant.
Weakening of regional currency against USD posed as negative sentiment to Asian
stockmarkets.
Meanwhile many shares at the Wall Street stockmarket
strengthened during mid week last week [18/6], making index of S&P 500 to
break through its highest record. The Fed’s promise to keep interest at lowest
level posed as positive sentiment.
The Fed also predicated economy of the USA tend to
stabilize this year. The statement, which heartened investors was made by
Governor of the Fed Janet Yellen. Previously, investors were anxious that The
Fed might change policy drastically in the near future. It turned out that the
prediction was wrong.
During closing session last Wednesday, index of S&P
500 increased by 14.99 points [0.77%] to the level of 1,956.98 which was the
highest record of all times as they score highest on June 9 last. Index of Dow
Jones rose by 98.13 points [0.58%] to the level of 16,906.62. Index of
Composite Nasdaq increased by 25.60 points [0.59%] to the level of 4,362.84.
In view of development at domestic, regional and global
stage, it seemed hard for IHSG to reach the 5,000 level in the near future. By
closing session last weekend [20/6]. IHSG was predicate to be at around 4,362 –
4,895 with tendency to weaken. Meanwhile for this week, IHSG was still under
pressure, moreover considering political sentiment at home so IHSG was project
to be at around 4,850 – 4,950 with little change to move. (SS)
Business News - June 25, 2014
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