Rupiah and IHSG seemed to
be drifting in opposite directions. When Rupiah value against USD was under
pressure, index of IHSG at BEI signaled strengthening.
The market saw Rupiah descending close to Rp.12,500
generating uncertainty to businesspeople. Foreign investors, especially non
American investors were questioning the feeble state of Rupiah which had its
negative effect on business.
Rupiah depreciation against USD which came to 4% - 5%
alone was the deepest slump in the past 6 years. Rupiah tend to weaken till end
of this year. Within 6 months Rupiah touched Rp.12,650 per USD by November 24.
2008.
Meanwhile Rupiah during transaction past week [10/12] was
closed at Rp12,330 per USD, way above APBNP assumptions 2014 which set USD at
Rp.11,800 and APBN assumption 2014 which set USD Rp.11,800 and APBN 2015 at Rp.11,900.
Surely businessplayers were expecting a Rupiah which was stable because if it
was factitive it would make company’s financial planning difficult.
Rupiah weakening this year was not just due to technical
factor such as the Fed’s action, but also other factors like Indonesia’s
fundamental economy which was sensitive to external factor.
Rupiah strengthening through 2010 – 2011 was more due
Quantitative easing [QE] adopted by the Fed which there a vast amount of Fund,
i.e. USD 600 million in QE 2, plus USD 85 billion per month which stopped last
October to propel US economy.
Massive injection of capital caused USD to overflow to
many regions which promised high return including the emerging markets. The USD
entered moneymarkets and stockmarkets of the world, making local currencies
including Rupiah to soar up. Through hedge funds, the USD continued to
strengthen out powering commodities and even oil.
Since May 2013 the Fed adopted a new policy called
Tapering off, gradually reducing supply of USD from QE. The policy was adopted
because America’s economy had strengthened as seen in economic growth,
employment and rising inflation. The policy caused USD to flow back to America.
Some countries of the emerging market like Indonesia were
posting sizable capital outflow. To keep foreign capital from flowing out, BI
had increased benchmark rate to the level of 7.75% by November 2014 against
5.5% in 2013. Previously had been maintaining benchmark rate at 7.5% in the
past 12 months.
At the stockmarket the condition was quite different
since IHSG kept moving up although the market was under heavy pressure.
The Moneymarket
Rupiah value against USD during
morning session last week [12/12] weakened to its lowest level in 5 years.
Bloomberg data index had it that Rupiah inched down by 0.4% to Rp.12,399 per
USD.
Rupiah even inched down by 0.53% to
Rp.12.415 per USD and moved in the range of Rp.12.415 per USD and moved in the
range of Rp.12,371 – Rp.12,421. Predictably Rupiah would be suppressed toward
Rp.12,375 – Rp.12,410 by closing session [12/12] while for this week Rupiah value was
predictably suppressed although not as heavy as last week so Rupiah would move
in the range of Rp.12,390 per USD.
It was noteworthy that the external
factor seemed still be overshadowing Rupiah. US economic data bettered and
strengthened USD which was under pressure in the past 2 days. Rupiah had been
under pressure over the week.
Meanwhile increase of benchmark rate
by BI to 7.75% had helped Rupiah from sinking any deeper. So it was right for
the BI Board of Directors [RDG BO] who in their meeting on December 11 last
decided to maintain BI rate 7,75% in anticipation of the Fed’s maneuvers.
RDG BI on December 11 2014 decided
to maintain BI rate 7.75% with Lending Facility and Deposit Facility respectively
at 8,00% and 5.75%. The interest level was still consistent to control
inflation for the short run after the oil price increase to bring it back to
the level of 4% + 1% in 2015.
The policy was in tandem with
stabilization measures taken so far to control deficit in current transaction
to a healthier level. BI was striving hard to stabilize macro economy.
Tight money policy was continued to
control inflation and deficit in current transaction, while accommodative
macro-prudential policy was adopted so monetary approach would not cause risk
on stability of the financial system.
Besides, coordination of policy
between BI and the Government was intensified to maintain macro-economic
stability especially on controlling inflation in relation to oil price increase
and deficit in current transaction and the process of structural reformation
for sustainable economic growth.
In America, the Fed’s policy to
increase Fed Fund Rate as per Q II-2015 had strengthened appreciation of USD
against nearly all currencies of the world, causing capital outflow in the
merging markets including Indonesia.
On the contrary , Europe and Japan’s
economy were still under pressure in spite of injected stimulus on the monetary
side. Economic slowdown in China was also continuing due to-balancing process
which had made global commodity prices to go down.
At home, economic growth in Q
IV-2014 was redicted to slowdown although improving again in Q-I 2015.
Especially being driven by slowing down economy in line with austerity program
and slowing down of household consumption as inflation effect.
For all through 2014, economic
growth was predicted to get close to below 5.1% - 5.5% but again inching up in
Q 1 – 2015 to around 5.4% - 5,8% in 2015. The brighter side of it was bettered
balance of payment with shrunk deficit and increased surplus of capital.
Indonesia’s trade balance posted surplus of USD 0.02 billion in October 2014
after deficit of USD 0.26 billion before.
The positive performance was thanks
to surplus in trade balance which increased in line with increased export of
manufacturing like automotive. Meanwhile on the financial side, inflow of
foreign capital remained high, being elevated by positive perception of
domestic economy. Accumulatively by November 2014 inflow of foreign portofolio
to Indonesia’s stockmarket came to USD 17.75 billion.
High appreciation of USD was in line
with the Fed’s policy which weakened nearly all currencies of the world
including Rupiah. In November 2074 Rupiah weakened by 0.21% on the average
[mtm] to Rp12,167 per USD.
Improved trade balance and inflation
being under control in October 2014 was not good enough to ease pressures on
Rupiah. However pressures on Rupiah was neutralized by optimism over future
economy.
Economist predicted that weakening
of Rupiah would continue through 2014. Monetary authorities were asked to watch
on the Federal Open Market Committee [FOMC] on December 2016 because it was
most strategic for economic stability in the future.
Weakening of Rupiah which was in
tandem with other Asian currencies caused BI to able to make intervention
today. Fear of reduced forex reserve was the reason why BI was not willing to
make intervention at the stockmarket. Unless there was cautiousness of BI,
rupiah had the potential to sink deeper to Rp12,400 this year end.
So it was all up to BI. If BI could
take action Rupiah would not sink that deep. On the other hand if BI did not do
anything, Rupiah might drop to as low as Rp12,300 per USD. Trend of USD
strengthening was triggered by falling world’s oil price to as low as USD 62
per barrel.
Besides, the discourse about the Fed
increasing benchmark rate made marketplayers speculate about the yielding
potential of that currency. Investors were expecting the Fed would signal
clearer message about the rate in FOMC meetig this December 16.
Not just that, lessened Indonesia’s
forex would pose as negative sentiment. Indonesia’s forex reserves by end of
November 2014 was posted at USD 111.14 down against October 2014 which came to
USD 111.97 billion. Fundamentally Rupiah prospect by Semester I 2015 was still
gloomy.
Rupiah weakening was also due to
domestic factors as Indonesia’s economy was vulnerable to global pressures,
among them bettered US economy which was not followed by Europe, Japan and
China.
Rupiah fluctuation happened since
the Fed stopped QE, plus positive and negative sentiment during the pas
Government. Rupiah’s lowest position was predictably the same as that in 2008,
i.e. around Rp12,400 while the strongest possible position was Rp12,000.- per
USD
Apparently Rupiah weakening had been
fundamental, i.e. from global sentiment. At home, law breakers to Law no.7/2011
on the prohibition of using foreign currency in stransaction must be
sanctioned.
In this case BI must consistently
publicise and enforce law No 7/2011 to strengthen Rupiah. Protection of Rupiah
could also be exercise by way of hedging in transaction.
Previously a number of economic
ministers, governor of BI, Head of the Financial Examination Board [BPK], Legal
Prosecutors and the Corruption Eradication Board [BPK] in a Coordinating Board
Meeting agreed to support hedging in the effort to anticipate Rupiah
fluctuation.
The Capital Market
IHSG index only inched up in spite
of positive sentiment from the regional and global side. IHSG even started
transaction in the red zone. During pre opening session last week end [12/12]
IHSG inched down by 1,534 points [0.03%] to the level of 5,151.161. while index
of LQ 45 inched down by 0.38 points [0.04%] to the level of 887.098.
During opening session [12/12] IHSG
inched up by 2.740 points [0.05%] to the level of 5155.435. LQ 45 index inched
up by 0.240 points [0.03%] to the level of 868.725. index was too late to grab
the momentum so it could but inch up. Some act of profit taking held IHSG
strengthening. On Thursday [11/12], IHSG ascend to the green zone toward
closing session, but fell again due to selling spree of premium shares.
Meanwhile Wall street managed to
rebound due to retail data which showed strengthening of US economy and
optimism about consumers’ expenditure. US stockmarket ended their 3 day
correction. Release of low import and export price which was accompanied by low
jobless claims and increase of retail sales had reserved the course of US stock
to the green zone.
Although oil prices was low,
consumers expenditure in the USA managed to surpass market expectation.
Retailers’ shares rose high. Shopping time ended well. During closing session
on Thursday [11/12], index of Dow Jones rose by 63.19 points [0.36%] to the
level of 17,596.34. index of S&P 500 increased by 9.019 points [0.45%] to
the level of 2,035033 and index of Composite Nasdaq strengthened by 24.14
points [052%] to the level of 4,708.16.
Asian stockmarkets strengthened
simultaneously. Last night Wall street motivated Asian marketplayers to sell.
Index of Nikkei 225 rose by 226 135.41 points [0.78] to the level of 17,392.81.
Index of Composite Shanghai weakened by 14.26 points [0.49%] to the level of
2,925.74/ Straits Times index increased by 9.22 points [0.28%] to the level of
3,327.92
At BEI IHSG still constantly circled
in the red zone over the past week. During closing session on Thursday [9/12]
IHSG inched down by 21.702 points [0.42%] to the level of 5,122.312 and index
of LQ 45 inched down by 3.366 points [0.38%] to the level of 880.912. The World
Bank’s perception that Indonesia’s economy for 2015 would only grow by 5.2% was
negative sentiment. The figure was lower than the estimate announced last July
at 5.6%. World’s economic slowdown would have its influence on price lowering
of some export orientated commodities. Hence income from export would be less
or at least be the same as this year.
However, Indonesia was able to
strengthen economic sector and jack up investment, so growth could be higher.
therefore the Government must maximize absorption of capital expenditure. By
last October Government’s capital expenditure only came to 38% of total
allocated financing for 2014. The ratio was too slow and inffective for meeting
economic growth target.
Beside economic growth, the World
Bank also projected inflation for the next year. Oil price increase by 30% was
feared to trigger inflation in Indonesia. Inflation on 2015 was predicted at
7.5%. Meanwhile the Government would concentrate on fiscal policy for macro
economy stabilization.
In general IHSG was projected to
move the varied way in trying to rise during opening session last Friday
[12/12]. Positive sentiment from the external side was expected to uplift
index. There was chance that IHSG would be in the range of 5.160 – 5,200 during
closing session [12/12]. If the level was attained IHSG still had the chance to
continue strengthening this week in the range of 5,175 – 5.225 thanks to
positive sentiment from the banking sector.
Business News - December 17, 2015
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