Tuesday, 23 September 2014


The post electoral euphoria sparkled at Indonesia’s moneymarket. There was ray of hope that IHSG index would soar up in response to Constitutional Court’s announcement of verdict which rejected Prabowo Sugianto-Hatta Rajasa presidential candidate’s claim of default to election count outcome to the Electoral Committee [KPU] in Court session on July 9 last.

Eventually Rupiah value strengthened moderately last weekend [22/8] and stood a change to continue strengthening this week, apparently after weakening over a few days in tandem with other Asian currencies, Rupiah bounced up toward closing day as the Constitutional Court [MK] announced their verdict. In the future the MK stood the chance to stimulate Rupiah strengthening, although global index trend would limit the space.

However, Rupiah was still subject to rumors of accelerated increase of interest by the Fed, which would restrict Rupiah strengthening. At home, BEI could also influence Rupiah although it tend more to strengthen.

The Moneymarket

Rupiah value over USD last Friday [22/8] strengthened significantly. According to Bloomberg Dollar Index, by opening day Rupiah inched up by 0.09% to Rp. 11,703 per USD. Generally speaking Asian currencies tend to strengthen against USD. Of 11 Asian currencies 5 of them strengthened with Won and Rupiah being most appreciated by 0.3%.

Rupiah was transacted to inch up by 0.3% to Rp. 11,657 per USD against the previous session on Thursday [21/8]. As MK read the verdict, Rupiah fluctuated highly. In the morning session Rupiah weakened, but bounced back again by afternoon.
Rupiah last Thursday [21/8] was closed at Rp. 11,712 per USD, inching up against previous position. According to data of JISDOR Rupiah was opened at Rp. 11,717 per USD.

That Rupiah had been responsive to MK’s verdict was true indeed. Governor of BI Agus Matrowardojo stated that the market was still waiting for the Court’s meeting outcome, which caused Rupiah to be corrected by political factor.

Meanwhile marketplayers of the world were keeping watch on the Fed’s meeting to discuss increase of US benchmark rate amidst optimism of the world’s economy to grow by 3.8% by next year. It seemed reasonable analysts and economist pled the Government and BI to minimize deficit due to oversized subsidy for oil which came to Rp. 300 trillion.

Fortunately Indonesia’s economy was saved by the bell as inflow of foreign capital increased to cover up the deficit. Still, the deficit issue and high subsidy for oil were not be ignored. Not less important was the inflation factor because the inflation target of 4.5% + 1% was exclusive of increase of subsidized oil price, increased electricity tariff and increase of 12 kg LPG gas.

There was still a third factor: the fiscal issue, since budget for oil subsidy was already swollen, oil production tend to be low, and state’s revenue was posting downturn. And then there was the fourth factor, i.e. the Fed’s issue if their policy to increase bank interest which responded negatively by the market especially in regard to portofolio investment.

Today investors of the financial sector were focusing their attention on political situation at home, rather than worrying about the Fed’s plan to increase bank interest and deficit including balance of payment. The reason was that increase of the Fed interest was more predictable after the Jackson Hole Forum rather than MK’s verdict.

Previously, BI saw that investors would worry about Indonesia’s current count deficit [DTB] and balance of payment [BOP]. However, BI was losing attention to the two issues. By end of this year, BI projected that deficit would be less than last year and was believed to be below 3.3% of GDP.

Global economic growth had been received up to 3.4% and projected at 3.8% in 2015 next. Accordingly, Indonesia’s economy was believed to improve. After MK’s verdict, positive sentiment was more from the external.

BI’s view was in tune with that of Finance Minister Muhammad Chatib Basri that the next Government was overshadowed by the possibility of the Fed increasing benchmark rate, which was feared to stimulate capital outflow at home.

Over the past 2 years Indonesia’s economy had been constantly influenced by the Fed’s issue. Besides moratorium of monetary stimulus for developing countries would have its impact on domestic monetary condition. Tight monetary condition was most likely to be executed by the next Government.

Under such circumstances, the next Government must respond to subsidy-for-oil which had been burdening the state budget. An example was the era of transfer of power from Megawati Soekarno Putri to Susilo Bambang Yudhoyono in 2004. At that time the Government instantly increased price of oil twice in March and October.

Not less important was the need for prudent management of overseas debt. As known, BI posted Indonesia’s overseas debt [ULN] by end of June 2014 to increase by USD 8.6 billion [Rp. 94.60 trillion assuming that Rupiah value was Rp. 11,000 per USD] or 3.1%. ULN in June was posted at USD 284.9 billion or equal to Rp. 3,133.90 trillion compared to position in Q I-2014 at USD 276.3 billion of Rp. 3.039 billion.

Increase of ULN was mainly on account of increased non resident ownership over bond issued by the private sector amounting to USD 4.2 billion and the public sector amounting to USD 1.2 billion and overseas credit for the private sector amounting to USD1.6 billion exceeding overseas loan of the public sector amounting to USD 0.8 billion.

With such development, ration of ULN against GDP increased from 32.33% in Q I-2014 to 33.86% in June 2014. Meanwhile DSR or ratio of debt payment of capital against ULN interest increased from 46.42% in previous quarter became 48.28% in 2014. Unless overseas debt of the private sector was not properly managed, it would bring pressures on Rupiah.

From the above picture it was clear that last week end [22/8] Rupiah would move in the range of Rp. 11,650 – Rp. 11,725 per USD with tendency to strengthen moderately. This strengthening trend would continue this week in the range of Rp. 11,600 – Rp. 11,700 per USD.

The Capital Market

Even before the judge completely read the verdict, IHSG had strengthened again. The various consideration and judgement read by the Judges convinced investors that things would not change the election outcome: Jokowi-JK was still the winning team and elected President. During closing session on Thursday [21/8], IHSG rose by 15.206 points while index of LQ45 increased by 3.160 point to the level of 889.664.

Sector wise, most of the shares sectors strengthened expect the plantation sector which dropped by 0.20%, the mining sector inched down by 0.36%, the infra-structure inched down by 0.12%. The sectors which strengthened were among others basic industry sector inched up by 0.83%, the mix industry sector inched up by 0.61% and financial sector inched up by 0.59%.

Before the MK session began suspense was in the air and the market was nervous. Marketplayers feared stormy demonstration against Court’s verdict would disturb the market as seen in selling spree to bring IHSG inched down by 33 points [06.65%] to 5,156.473. Foreign investors contributed to IHSG strengthening by doing foreign bet buy if Rp. 410 billion.

Generally the frequency of trade transaction came to 212.073 times at the volume of 5.198 billion or Rp. 4.867 trillion. 155 shares went up, 141 went down and the rest remained stagnant. Capital inflow was still storming the stockmarket, accompanied by IHSG movement in maintaining uptrend flow. IHSG had succeeded in breaking through highest level through 2014 thanks to favorable political condition.

The condition confirmed the fact that IHSG was on the uptrend, hence forming a new resistance level at 5,245. This was a resistance target to be set at 5,245. This was a target to be met ensure short term uptrend course.

Meanwhile the US stockamarket had in fact generated positive impact. Index of S&P 500 increased by 0.25%, index of Dow Jones increased by 0.35% while Nasdaq was corrected to 0.02%. Stockmarkets in Asia moved simultaneously at the green zone thanks to positive sentiment at Wall street as indicated by index of S&P which scored highest record. This signaled US economy which turned better. Wall street was continuing the bullish trend in response to positive US economic data.

Index of DIJA & S&P strengthened by 0.36% and 0.29% respectively at close at 17039.49. Activities of US manufacturing increased this August as reflected in Flash Manufacturing PMI which ascended to 58 against the estimated 55.7. Sales of house in the USA increased by 2.38% to become 5.15 million units last July, the highest in the past 10 months. Positive US economic data increased market optimism that economic growth in Q 3 2014 would increase.

Hong Kong stockmarket took the lead in strengthening. Index Nikkei 225 increased by 33.03 points [0.21%] to the level of 15.619.23. Index of Hang Seng went up by 113.08 points [0.45%] to the level of 3,328.67. Index of composite Shanghai grew by 3.87 [0.17%] to the level of 2,234.33. Index of Straits times strengthened by 4.58 points [0.14%] to 3,328.67.

Of 502 shares traded, 34 strengthened, 4 weakened and 464 stagnate which could be investor’s target because of their prospect 8 out of 10 sectors listed at BEI with highest increase happening at the property sector 0.38%. Two other sectors weakened, i.e. mix industry and agro-business.

IHSG stood a chance to break through highest level last weekend in the range of 5,225 – 5,300. If this could be attained, IHSG through the week might continue strengthening to 5,250 – 5,300. Increase was due to marketplayer’s zest after being haunted by political uncertainty for a few weeks.

Moreover shares of some sectors tend to be more expensive after being under pressure for a few days; they were of the following sectors: finance, banking construction, trading, retail & consumption, and infra-structure. Meanwhile the agriculture and plantation sectors were still troubled by low global demand. (SS)

Business News - August 27, 2014

No comments: