Governor of the Fed Janet
Yellen stated that Policy Markers would stay patient about increasing benchmark
rate. However they would still consider to increase bank interest.
USD value instantly weekend
against most of leading currencies last mid week as Yellen made his statement
at the Congress. In her semi-yearly monetary policy report, Yellen again firmly
underscore the Fed’s promise to be patient about keeping benchmark rate from
going up because it was impossible to do so at least until the next Policy
meeting.
Yellen told the Committee
of the Banking Senate that although the policy was designed for economic development,
too many Americans were still jobless or semi jobless. Furthermore wages growth
was still low and inflation was still below the Fed’s long term target of 2%.
USD was still under
pressure after Yellen’s comment. In her
two hour meeting with the congress Yellen explained that the committee might
increase interest in the next few months. Furthermore the policy makers would
erase the word “patient” in elaborating bank interest rate.
And there was possibility
of increased bank interest at every meeting. The approach means increase of
interest in early June although investors interpreted Yellen’s statement as
instant increase of interest.
It was noteworthy that in
some countries the Central Bank deliberately let their currency to weaken.
Unlike the US Central Bank which started to reduce their liquidity support to
the market, this year ECB would go down the market to execute quantitative
easing, and this was also the policy adopted by Bank of Japan.
This step automatically
made the USD to strengthen. Central Banks of Canada, Australia and India also
lowered their bank interest, which was to keep their currency for strengthening
significantly. Under such circumstances it was no need to interfere the market.
There was lesson to learn from 2013 that market intervention had no significant
impact on currency value drain forex reserves instead.
Over the year, Rupiah value
had been weakening against USD. However as a whole, compared to other
currencies Rupiah had been strengthening. So it was right to say that Rupiah
was fluctuating according to the national fundamental factor.
Meanwhile IHSG stepped on
the stairway up to the top, breaking through 5,400; investors kept rushing to
the domestic stockmarket due to good prospect of some sectoral shares.
The Moneymarket
Rupiah was trying to move
up last week (25/2/2015) Downturn of USD index would clash head on against US
economic data which was sentiment to determine Rupiah value. Governor of the
Fed Janet Yellen showed her satisfaction of economic performance except the
inflation factor.
The intention to increase
benchmark rate was there, but at least in the next two FOMC meeting Fed rate
was almost certain to settle. Increase of the Fed’s rate would soon be preceded
by forward guidance. The market responded positively to Yellen’s statement, as
shown by index of S&P which increased, return of US Treasury was reduced in
tandem with USD index. China’s manufacturing figures was predicted to descend.
Rupiah itself weakened
together with most of the currencies in Asia and in tandem with strengthening
of bonds. No over-intervention was visible by BI at the currency market.
Yellen’s statement which breezed out hope that Fed rate would not increase in
the near future generated positive sentiment on Rupiah. However, bad economic
data in China could keep strengthening trend of USD in Asia.
Bankers and stock observers
rated that diminishing Rupiah value which getting close to Rp.13,000 per USD
must be watched on as it might hindrance Indonesia’s economic development.
Rupiah at inter-bank transaction in Jakarta last Thursday (26/2) weakened by 16
points to become Rp.12,872 against the previous level at Rp.12,856 per USD.
Rupiah again slumped
against USD with growing market anxiety over the situation in Greece as the
potential of default was still there.
Some marketplayers were
beginning to drift domestic sentiment, i.e. inflation data 2015 and Indonesia
Trade Balance of January 2015 to be announced by BPS early this week.
Predictably strengthening
of USD against global currencies would continue to happen resulting in lengthy
Rupiah downturn. Strengthening of USD continued as some central banks were also
weakening their currency against USD.
The apparent “exchange rate
war” in global economy was becoming more visible as ECB and BoJ started
quantitative easing followed by the central banks of Canada, Australia,
Singapore and even India.
The impact on Rupiah value
had been visible since end of 2014 when Rupiah was at the level of Rp.11,500
per USD and continued to weaken to around Rp.12,800. Weakening of exchange rate
was done to inject stimulus to export, especially export of manufacturing
products.
Unfortunately the
Indonesian Government did not have the opportunity to benefit from Rupiah
weakening as prices of premium export commodities was low while demand from
buyer countries were just a low and not supportive to economic growth.
On the other hand, BI
supported the real exchange rate system (RER) of Rupiah so although it was
weakening against USD, Rupiah remained competitive against other currencies. In
fact Rupiah was still strong enough in the “basket” of global currencies, still
Rupiah value should be safeguarded.
If Rupiah failed to
maintain is value against USD and other currencies, the negative impact would
be felt in economic growth rate. If Rupiah continued to sink deeper than Rp.13,000
per USD , Indonesia’s economic growth would be a cry form the targeted 57.7.
Before the USD turn weak
against other currencies last Thursday (25/2) Janet Yellen stated in her second
day of presence at the Monetary Service Committee that even when the time comes
for the Fed to increase interest, they would keep supporting America’s economic
and keep watching the labor market to make sure betterment was there time
after.
The Fed decided to be
patient in terms of interest increase, meaning increase would not be at least
until the next few meetings. Furthermore Greenbuck would be under pressure on
the second day after Yellen’s statement. USD index which monitored Greenbuck
against 6 other currencies was down by 0.29% to 94.223.
BI rated that in spite of
the tendency of Rupiah weakening against USD lately, broadly speaking
Indonesia’s economic development was rated as satisfactorily good. BI saw that
in January there was inflation and in February inflation was under control.
Even some Government’s policy to reform subsidy management.
On the monetary side, BI
kept watching development in the USA whose economy tend to improve and also to
watch Europe and Japan who planned to do quantitative easing. By estimate
Rupiah position would be around Rp.12,800 – Rp.12,900 per USD during closing
session last weekend.
The Capital Market
IHSG index during early
session last week (27/2) slided down fast. Act of profit taking made index to
end up at the red zone. To close transaction at session I (27/2) IHSG was at
the position of 4,449.17, down by 2.25 points. Meanwhile index of LQ 45 was
corrected by 1.41 points (0.15%) to become 958.8.
During opening session,
investors were zealous to make a reckord at IHSG. Not long thereafter, profit
taking was at target to make the best of index strengthening in the past few
days. Act of profit taking caused IHSG to nose dive, touching the lowest level
at 5,462.19
Trading was going on
merrily, 121,180 transaction took place involving 3.54 billion lots worth Rp.2.95
trillion. 136 shares rose, 106 went down and 85 not for sale. IHSG moved in
parallel with regional stockmarkets which tend to be corrected.
Strengthening that happened
lately was befitted by stockholders for profit taking at weekend. Index of
Nikkei 225 inched up by 28.74 points (0.15%) to become 18.814.53. index of
KOSPI went down by 2.8 points (0.14%) to become 1,990.28. Index of Straits
Times inched down by 0.19% (0.01%) to become 3,425.99.99.
Apparently BI’s policy to
lower BI rate by 25 bps to become 7.5% was responded positively by the stock
players; the positive impact was apparent, IHSG broke through 5,400.
Traffic of index would
still progress till year end. The progress was attributed to betterment of the
sectors of property, construction, infrastructure, and banking. By year end,
many analysts projected index could break through 5,600, the lowest level
attainable by IHSG. However it was not impossible that IHSG would exceed that
level.
As known, BI lowered BI
Rate by 0.25% to 7.5% with lending facility of 8% and Deposit Facility of
5.50%. BI’s policy was in line with the effort to bring deficit in current
transaction to a safer level.
This year stockmarket would
have to compete against bond market. The trend of bond market in Indonesia
through 2015 was notably positive as seen in return of current year at 6.14%
from 175,89 in January to become 187.14 on February 23 last. Meanwhile IHSG on
February 23 posted return of current year amounting to 3.37% from 5,226,95 to
5,403.28.
The value of conventional
outstanding Government bond through 2010 – 2014 posted increase every year. By
end of 2014 the total outstanding was Rp284.4 trillion an increase of 24.7% (y
o y) against previous year.
Meanwhile the value of
outstanding Government’s Sukuk (a Syariah based bond) by end of 2014 was posted
at Rp.57.8 trillion, an increase of 60.8% against the previous year. Until
January 2015 last, realization of Government’s bond release came to Rp.41.37
based on estimated Government’s bond release (February – December 2015) based
on RAPBNP 2015 amounting to Rp.266.63 trillion against Rp.308 trillion.
However corporate bonds had
their outstanding value by end of 2014 at Rp.47.8 trillion, a downturn of 18.8%
(y o y) against previous year. Realization of corporate bonds issuance
including Conventionals and Sukuk per January 2015 was Rp.4.8 trillion with
estimated value of Rp.60 trillion by end of 2015.
At the secondary market
there was Government’s transaction of Rp.16 trillion per day and in corporate
shares reaching Rp.700 billion per day. Downturn if BI interest, downturn of
world’s oil price, the Fed’ plan to increase FFR, effort to restore economy in
Europe, political turbulence at home and efforts to enhance development by the
new Government were the factors that governed Indonesia’s destiny through 2015.
From the above picture
there was chance that IHSG would rebound during closing session last weekend (27/2)
at 5,450 – 5,500. This week, IHSG index was predicted to move in the range of
5,475 – 5,525 by positive sentiment from the Fed’s plan to increase FFR and
downturn of BI rate at home last week. (SS)
Business News - March 4, 2015
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