The effort to build
positive perception among marketplayers was not easy, but the Government and
Indonesia’s Financial Authorities must strive to do it somehow amids all the
negative issues in circulation.
All efforts to create positive
perception of national economic condition and Government’s image could help to
comfort the market so it takes Government’s skill to tackle it to keep it from
becoming a rolling snowball.
On the external side the Fed stated
that America’s economy posted growth from April to May, rebound against Q-1
when it posted contraction. Such was disclosed at the latest economic review by
the Fed. In an evaluation recorded in Beige Book, survey report from all over
America showed that economic activity as a whole was showing increase. Outlook
described by respondents were on the whole very optimistic.
As told, US economic growth unsuspected
showed downturn in the first 3 months of this year. The cause of contraction
was allegedly extreme cold weather. However, foul weather combined with
strengthening of USD forced the Organization for economic Cooperation and
Development (OECD) to consider to axe US economic growth prediction.
Today OECD predicted US economic growth
would be only 2% 2015 and 2.6% next year. The prediction was less that
prediction in November last at 3.1% and 3%. The Fed said that in general
manufacturing activity was notably stable in the pat 2 months.
Meanwhile some states reported there
was increase in retail budget where retailers predicted increase of sales by
end of 2015.
Beige Book also reported about
energy industry being injured by downfall of world’s oil price. Te result some
oil companies axed their number of workers and limited their oil drilling
activities. This data helped the Fed to decide when was the right time to
increase benchmark rate.
On the internal side, BI guaranteed
to be always present at the foreign currency and bond market to rescue Rupiah
when Rupiah sank close to its lowest level in 17 years at Rp.13,245 per USD.
Last March, Rupiah touched its lowest level in 17 years at USD 13,245 per USD.
Yield of bonds kept increasing since last week and touched 8.198%.
Inflation data of export-import was
also the main reference of marketplayers in doing activities. Broadly speaking
all exiting data indicated that all was well under control.
The Moneymarket
Rupiah was closed to inch down to Rp.13,281
per USD in Thursday (4/6) last and was transacted at Rp.13,300 per USD.
Previously Rupiah was opened to stagnated at Rp.13,230 per USD but further
inched down by 0,62% to Rp13,312 per USD. BI’s data of last week end (5/6)
placed Rupiah at mid rate at Rp.13,234 per USD, up against the previous
position at Rp.13,196 per USD.
Strengthening of USD had been
inevitable and had been going on since the era of President Abdul Rahman Wahid.
Before being closed at around Rp.13,290 USD once touched its highest level at
Rp.13,313. This was the strongest USD position in the past 17 years since
August 7, 1998.
Analysts believed there were some
factors that made Rupiah weaken:
Firstly, low
economic growth rate and the predictions ahead.
Secondly, foreign capital that kept
flowing out of the country. The highest position of USD was at Rp.16,650 on
June 17, 1998 when Monetary crisis tormented the nation. The second highest was
in November 2008 at Rp.12,650.
At that time there was global crisis
as Lehmann Brothers fell, while the third highest position in time of President
Gus Dur administration, i.e. Rp.12,000 per April 26, 2001. Today Rupiah value
had fallen by April 26, 2001. Today Rupiah value had fallen by 5.9% against USD
since early 2015. Weakening of Rupiah was the most severe among other Asian
currencies.
Still about the analysts opinion,
slowdown of Indonesia’s economy in Q 1-2015 which only grew by 4.7% made
economic growth target hard to attain. It would make Rupiah sink even deeper.
They predicted the position of USD by end of this year be around Rp.13,200. The
following are the position of Asian currencies against USD until Thursday (4/6)
last: India’s Rupee -1.1%, Singapore Dollar -1.6%, South Korean Won -1.8%;
Vietnamese Dong -2%; Japanese Yen -3.6%; Malaysian ringgit -5.8% and Rupiah
-5.9%.
Analysts also saw that external
sentiment was more prevalent as pressure on Rupiah. One of them more report of
employment in America which was positive as expected. Bettered US economy data
would trigger speculation that Fed would increase benchmark rate.
Index if USD was continuing
weakening against Euro after ECB meeting which although not changing benchmark
rate or quantitative easing – had increased their inflation expectation also
means that there must be adjustments in return and expectation of ECB stimulus
which was not as high as expected.
Weakening of USD index was followed
by increase of German bonds and other bonds around the world. Investors would
focus attention on GDP of the Euro zone. Pressures on currencies of developing
countries where foreign investors dominated the bond market including Indonesia
were having their currency weaken.
Return of bonds in developing
countries were seen to increase following return of German bonds. Return of SUN
promissory Notes again went up in tandem with slump of IHSG and Rupiah
depreciation.
One of them was BI’s step amidst
integration of Indonesia economy with global economy, currency stabilization
sustainable national economic growth, the situation needed support from and
turbulent proof. BI was still constantly trying to interfere domestic forex
reserves.
Such was in line with BI’s mission
as a financial institution having the mandate to maintain Rupiah stability.
Some sound measure was taken by BI to enhance deep probing of the forex market,
i.e. to regulate transaction of foreign currency an Position of Net Forex
reserves through the following regulation:
Firstly, PBI No 17/PBI/2015 on
Revision of bank Indonesia regulation Number 16/16. PBI 2014 on transaction of
Foreign Currency on Rupiah between bank and the domestic counterpart. Secondly,
PBI No.17/2015 on Revision of BI regulation No 16/17/PBI/2014 on forex
transaction against Rupiah between bank and foreign counterpart. Thirdly PBI
regulation Number 5/13. PBI 2003 on the Forex Position.
Fine tuning of the above regulation
was expected to speed up deep searching of domestic foreign currency which was
among others characterized by sufficient liquidity, convenience in transaction,
reasonable price and minimum risk to maintain economic stability.
The fine tuning also proved BI’s
sound support to domestic economic activities by supporting hedging practices
by economic players to mitigate market risk and forex liquidity.
Toward attaining such a condition,
BI was striving to maximize capacity and flexibility in doing currency
transactions by eliminating bank’s obligation to maintain position of Net Forex
Position every 30 minutes in tandem with adjustment of rules of foreign
currency against Rupiah, credit or financing as underlying, and expansion of
scope of underlying transaction including also income estimation and expense
estimation of trading and investment activities.
To assure foreign investors in
maximizing use of derivative instrument as hedging practice of their investment
in Indonesia, there would be write off for minimum 1 (one) week derivative
transaction for foreign investors. Adjustment of forex transaction against
Rupiah was done very cautiously and still observing the effect on stability of
financial system by making it mandatory for banks to obey rules related risk
mitigation.
From the above picture, Rupiah was
projected to be in the range of Rp.13,200 – Rp.13,300 per USD and to continue
through the week in line with rising demand for USD for various corporate need.
The Capital Market
Index of IHSG fell by 3 points last
Thursday (4/6) due to hard pressure to sell. Index had to slip away from 5,100.
Closing transaction, IHSG was axed by 34,678 points (0.68%) to 5,095.821 while index
of LQ 45 was corrected by 7.871 points (0.89%) to level of 879.328.
The plantation sector was most
sharply corrected while the trading sector was the only sector that
strengthened. Foreign investors made net sell of Rp.385,2 billion while Wall
street was under correction toward announcement of US employment data. Greece’s
uncertain position against creditor state also generated negative sentiment.
During closing session last Thursday
(4/6) Dow Jones weakened by 170.69 points (0.94) to 17,905.58; index of S&P
500 was down by 18.23 points (0.86%) to the level of 2,095.84 and index of
Composite Nasdaq dropped by 40.11 points or 0.79% to 5.059.13. Index at Wall
Street weakened due to falling price of oil commodities and negative sentiment
from Greece who requested for Suspension of debt payment.
Greece was the first country who
requested for suspension of debt payment of IMR since 1980. IMF stated that
supposedly the Fed suspended increase of benchmark rate till mid 2016 as IMF
lowered America’s growth projection for the second time in the past 3 months.
IMF lowered US economic growth from
3.1% to 2,5%. Data of Initial Claim of last week again showed downturn which
indicated the labor market remained strong. Data of non-farm payrolls was
predicted to increase to 225,000 people while unemployment was predicted to
stay at 5.4%
The course of Asian stockmarket last
week end weakened (5/6) moved downwards as seen in index of Nikkei 225 which
weakened by 109.95 points (0.54%) to the level of 20,378.24 and index of
Straits Times also inched down by 2,86 points (0.09%) to 3,342.14.
One thing was sure downturn of IHSG
by last week was correction on the 5th day and was lowest closing
since transaction on May 4 last. From the domestic sentiment, marketplayers
feared inflation pressures toward Ramadhan in the next months and Idul Fitri
next July and the trend weakening of Rupiah against USD.
Foreign investors seemed to be
switching porto folio. Evidently State Promissory Notes (SBN) of foreign fund
which entered came to USD 600 billion 2 days ago amounting to Rp.53.1 trillion
since early year. There were 2 main reasons which made investors worried and
forced them to release shares:
Firstly, analysts saw that Indonesia
would enter an era of high inflation in June and July due to Ramadhan and Idul
Fitri triggered by price of food.
Secondly, investors was influenced
by statement of a Singaporean expert Lee Boon Keng about the need for Indonesia
to run stress test in the banking sector till to anticipate Rupiah value to Rp.25,000
per USD.
Fear of inflation was groundless.
Either BI or the Government had high concern for downpressing inflation. BI,
the Central Government and Provincial Governments kept coordinating to monitor
inflation. The provincial inflation controlling team (TPID) were intensively controlling
stock of goods especially food to prevent unnecessary price increase.
Most economist believed that
inflation this year could be downpressed below 5%. BI also believed that this
year inflation could be in the range of 4 plus minus 1%. The stress test to the
level of Rp.25,000 was something not to be adopted. Empiric data had it that
the lowest Rupiah level was Rp.17,000 per USD during the crisis of 1998.
The realistic and reasonable level
of stress test was Rp.15,000 – Rp.36,000 the way it was run by BI and OJK. At
that level, BI and OJK shared the belief that the banking sector still had
strong resistance. Banks in Indonesia had no great exposure in foreign currency
when Rupiah was at Rp.16,000 per USD.
By March 2015 CAR of banks were
still high, i.e. around 20.7% way above the minimum requirement of 8%. Ratio of
NPL remained low and stable above 2.4% gross. The condition of liquidity was
still safe as indicated by Third Party growth in March 2015 at 16.0% (y o y).
Beside stability in banking and
economy, Indonesia’s economy was in general notably good. Lately many
infra-structure projects were executed, and the Government was committed to
speed up liquidation of capital expenditure, while BI planned to relax macro
prudential policy. Other positive point was support by some countries and
multilateral bodies for Indonesia.
In this month of June the Government
promised the next phase of economy package as part of structural reformation
including tax incentives and a number of policies to solve high production
cost. The new policy package was expected to propel economic growth in Q2 till
Q3 and Q4 next.
Whats’s more, BI consumer’s survey
indicated Consumer’s Confidence Index in May 2015 had strengthened, after
weakening in the past 2 months. This was reflected in Consumers Confidence
Index of May 2015 which increased by 5.4 points to become 112.8 Strengthening
of IHK was driven by increase of two key components i.e. today’s Economy
Condition Index (IKE) and Consumer’s Expectation Index which increased by 3.7
and 7.0 points respectively against previous months.
Survey outcome indicated that
pressure from soaring prices would cool off in August 2015 as demand turn back
to normal After Idul Fitri. Downturn was predicted to happen in all
commodities, the biggest downturn being in transportation, communication and
Financial services.
This year the Government planned to
spur on infra-structure projects at the value of hundreds of trillions of
Rupiah. Ten prioritized projects was worth Rp.220 trillion of investment, which
were the Bontang Oil Refinery Plan at the capacity of 235 thousand fered by
tender this year end. Furthermore the drinking water project in West Semarang
at the value of Rp.765 billion, to be realized in June.
Besides, the Balikpapan – West
Samarinda toll road project at the value of Rp.11.4 trillion. Land clearing had
been accomplished 80%, the auction was schedule for September 2015. Furthermore
revitalization of 3 small and medium size airports of the 10 targeted airports
in Lampung, Palu and Komodo. The fifth project was the High Voltage Direct
Current (HVDC) power transmission projects inter-connecting Sumatra and Java at
the value of Rp.20 trillion.
Furthermore the railway
transportation project for cargo in East Kalimantan worth USD 3,5 billion (4,5
trillion) involving Russian investor. Furthermore 500 Kv power transmission
project from South Sumatra to North Sumatra at the value of Rp.35 trillion.
The eighth project was the Soekarno
Hatta airport express tain project at the value of Rp.24 trillion target for
June 2015. The ninth project was Batang Powerplant project of 2000 MW capacity
worth Rp.40 trillion today only land clearing stage completed and to undertaken
by PLN. Lastly four toll road sections in Sumatra, i.e. Medan – Binjai,
Palembang – Indra Layla, Pekanbaru – Dumai and Bakaheuni – Tebangi Besar at the
value of Rp.30 trillion.
Furthermore through the Regulation
of the Ministry of Energy of Energy and Mineral Resources No 16/2015 on
requirements for benefit ing from tax facilities for capital investment on
certain sector and Energy and Mineral Sectors, the Government allowed
convenience to investors entering the energy sector
There were 8 special business lines
in certain areas which were entitled to tax allowance from the Government,
which were: oil and gas, minerals and coal, electricity and alternative energy.
For the coal minery sector, the
Government would only give incentives to two business sectors. Firstly
gasification in all sectors in all provinces at investment value of least Rp.100
billion. Secondly, processing of liquid coal especially in Central Kalimantan,
East Kalimantan, North Kalimantan, Central Kalimantan, Aceh, Jambi, West
Sumatra, Bengkulu, South Sumatra and Riau islands. Minimum investment was Rp.100
billion.
Meanwhile for the mineral minery
sector the line of business to be given tax allowance were gold and silver,
iron sand, iron ores, Uranium and thorium, tin, black tin, bauxite, copper,
nickel, mangan, zinc and zircon. Businesspeople were entitled to tax allowance
on condition that they would build smelters outside Java for certain commodities.
The minimum amount of investment was
Rp.100 billion for iron, uranium, tin nickel and mangan. The minimum investment
for black tin and zircon was Rp.50 billion, and bauxite and gold Rp.250
billion. By that policy and mining would grow. As known, selling price of the
said commodity prices was low today so investors were relictant to invest in
this sector.
From the above picture it was
apparent that over the week and to continue this week IHSG was predicted to be
fluctuative in spite of the chance to rebound if external pressures to sell was
low as global market turned condusive.
The chance to rebound was triggered
by acts of buy-back of certain leading shares especially in the banking sector
although being under pressure to sell as the price was in over sold zone. In
the closing session last week (5/6) IHSG moved in the range of 5,110 – 5,180.
This week IHSG stood a chance to inch up to around 5,120 – 5.220. (SS)
Business News - June 10, 2015
No comments:
Post a Comment