Long before the Legislative
and Presidential Election was held, predictions already signaled that the
political year was not condusive to economic activities and now it was evident
that the prediction was true indeed. Among the evident was realization of
economic growth in Q I and Q II this year at 5.21% and %.12% respectively which
was way below concensus of 5.5%.
It was not totally true that world’s economic slowdown
was note fully restored. It was also not fully true that economic slowdown was
due to monetary and fiscal policy which was deliberately adopted to slowdown
economic growth. There was one monetary and fiscal factor which contributed
direct effect to economy the Presidential election.
The legislative election on April 9 last had passed and
hardly was there any political turbulence that followed. But the Presidential
Election on July 9 last was different: one of the contestants rejected the
election outcome and brought the case to the Constitutional Court who was
supposed to settle the case on August 22, 2014 at the latest.
Now the electoral dispute session was underway at court
and it induced negative sentiment in IHSG index and the BEI index which was
closed to drop by 50.86points [1.00%] to the level of 5,058.2327 last Wednesday
[6/8].
Such was reasonable because fear of marketplayers that
the Constitutional Court Session would end up in undesirable outburst would be
benefited by investors to sell premium shares. However the claim over possible
cheating in the Presidential election last July had its impact on shares
transactions.
The only thong was that the impact was not too
significant because in spite of claims things was still safely running. Besides
to look at internal economic condition, some sectors were not growing too well.
Trade balance was still in deficit making shares unappealing to the market.
Stockmarket fluctuation in the past few days as indicated
by IHSG being negative was due to combined global and regional influences.
Today the market was responding to global incentives as well the case of
election dispute at home.
Soon as the Constitutional Court verdict was coming near,
the market would respond more spontaneously especially when the condition was
safe it would bring positive sentiment to the market. However if the condition
was in reserve such as mobilization of the masses the market would respond
negatively. The market would keep fluctuation until the Court make their
verdict.
The regional stockmarket condition which was not-so-good
was one if the factors that caused IHSG to weaken. On the internal Side,
Indonesia’s economic growth in Q II was also unimpressive, not to mention the
political tension.
Generally speaking the domestic and global factor had
their sentiment which tend to be negative was reason for investors to do profit
taking. In America the Fed’s policy on credit interest would drive global funds
to flow out from the emerging markets to America.
Not just portofolio investment, direct investment would
also be affected by political turbulence. This was reflected in investment
realization in Q I and Q II at Rp105 trillion and Rp115 trillion respectively.
With direct investment targeted at Rp450 trillion, investment of much higher amount
would be needed in Q III and Q IV.
Unfortunately in this Q III political situation was still
heightening and it would be hard to expect investment in Q III and Q IV would
reach the level of Q II. This was because investors tend to be reserved and
wait for the Court’s final verdict on election dispute. Most probably
realization of direct investment would soar up in Q IV.
From the above picture it was easy to conclude that the
reaming 4 months of budget year 2014 political stability was the indispensable
thing to be established to ensure security for political stability. Where world
demand dropped, direct investment was the key solution to strengthen GDP.
To ensure political stability, it would be wise to permit
security forces to take firm action to demonstrators to prevent violence and anarchy
and teach the political elite to be orderly and elegant in their political
moves.
They must be made to understand that anarchy in any shape
would destroy national image and credibility in the eyes of the world including
investors would be reluctant to invest in that country. (SS)
Business New - August 15, 2014
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