Wednesday, 28 October 2015


Greece finally fell into default after minute to minute of hard struggle without result. Somehow the Eurozone never gave up to find solution before referendum run on July last to breeze out hope for the market. IMF confirmed that Greece was unable to pay their €uro 1.6 billion based on the agreed schedule.

For that matter the Executive Director of IMF Cristine Lagarde would report to the Board of Creditors that Greek ‘postponed payment’ which was the official word for ‘default’. Greece was entitled to receive funding in the future from global creditors if the amount due was settled.

Greek Prime Minister Alexis Tripas asked for extention of payment deadline. Around 11 hours before deadline, Athens asked for 2 year extention of international bailout deadline and financing. Realizing the consequences if the great debitor quits from the Eurozone, Euro Executives never gave up to find a way out.

Euro group stated they would discuss request for credit and rescheduling of credit. Still it was not clear to what extend agreement was arrived at. As there was friction between Athens and the capitalists of Europe after five long months of negotiation without result, relationship between the two worsened as Greece rejected the proposal and choosed to run referendum.

Such was the reason why some Asian currencies were suppressed in the past few months. The condition was felt last May when Asian currencies rushed for a high position amidst uncertain condition.

Starting with shocking outcome of Election in Britain, positive data of Uni Europe mixed with Greek anxiety over Greek unending problem, unstable US economic data and the downfall of ¥en, all the factors made investors to be more cautious.

Statement of Bill Dudley, Head of New York Federal Reserve about his doubt when the Fed would increase FFR, had accelerated momentum of Euro strengthening. Some currencies were shaky being triggered by those issues.

After arriving at highest level at 1.1446 and stable for a few days at 1.14 regionally, Euro and USD dropped drastically in two consecutive weeks. Steep downturn happened in mid-May 2015 as news spread out that Greece had used the emergency saving for paying IMF.

When Greece announced that they could not afford to pay of debt by end of May 2015, the Euro – USD pair again fell to the level below 1.10. After touching the lowest level against USD on April 2015, surprisingly Poundsterling was fortune to move up by early May 2015 when election outcome in England showed victory for the Conservative Party.

Investors were changing to poundsterling with fresh confidence. The value of Poundsterling continued to move upward as Bill Dudley made a statement on May 12, 2015 which denied expectations that the Fed would increase bank interest in the near future, combined with the news that Greece would again suffer crisis on May 13, 2015. At the same time the Governor on BoE stated that inflation in England posted negative value or -0.1%.

With all the confusing news in the USA and Europe over the first half month of May, Yen succeeded to maintain stability against USD at 118.5 and 120.0 when positive data from the USA and negative news from Europe and England by end of month buoyed USD up, Yen descended gradually.

The Moneymarket

Rupiah during inter-bank transaction on Friday day last (3/7) strengthened by 17 points to become Rp.13,308 against the previous position of Rp.13,325 per USD. Rupiah still managed to settle at positive level although moderately, as players of the money-market were still anticipating result of the Greece referendum and creditor’s respond to the referendum outcome. Weakening of USD was also on account of non-farm payrolls in June which was below market expectation.

Other economic data that served as market propeller were among others index of activities of the service sector in Spain and England and data of retail sales in the Euro region, which influenced the global moneymarket.

Market expectations that accelerated absorption of budget for infra structure development by the Government in Semester II would strengthen Indonesia’s fundamental economy increased positive sentiment for Rupiah which at the moment was notably stable.

Previously USD strengthened against Euro as Greece fell into default in debt payment to IMF. This European common currency was under pressure when Greek Finance Minister Yanis Varoufakis stated that Greece would not pay bebt installment to IMF which was due on June 30.

Greek Prime Minister Alexis Tsipras furthermore stated that the Government of Greece proposed a deal of two years credit based on the Europe Stability Mechanism in the last minute effort to prevent default and the possibility of Gexit. The statement was made a few hours before the bail out fund would end on Tuesday last week (30/6) amidst mounting anxiety over fearful Greek economic condition.

In the USA, the Conference Board Research Group based in New York stated in their monthly report that US Consumer Confidence had been on the upturn in June. Index rose from 94.6 in May to 101.4 in June, way above the market consensus of 97.4.

To end transaction in New York, Euro fell to USD 1.1144 against 1.1248 the previous session and Pound sterling slumped to USD 1.5731 against USD 1.5736 the session before. Australian Dollar inched down to USD 0.7714 against USD 0.7703. USD was worth ¥en 122.46. USD inched up to Swiss France 0.0349 against the previous 0.9264. Against Canadian Dollar, USD inched up to 1.2494 against the previous 1.2494 per USD.

Meanwhile German Kanselir Angela Merkel underscored that Germany would not discuss Greece’s new request before the execution of Referendum on July 5 2015. Nearly one out of every two Greek citizen voiced ‘No’ in the Referendum of bailout package being offered by creditors. However, the capital control policy put in effect by the Government made many voters change to ‘Yes’.

The Referendum conducted by Prorata from Sunday (28/6) to Tuesday (30/6) as the Greek Government applied tight Capital Control and closed banks as negotiations failed. Before the Government put capital control in effect, 57% respondents choosed ‘No’ 30% choosed “yes” and 5% abstain.

However, after the Regulation which restricted cash drawing to €uro 60 at ATM effective on Monday (29/6), the number of citizens who choosed “Yes” increased. In the Referendum run on Tuesday (30/6) 46% choosed “No” while 37% choosed “Yes” and 17% had not decided.

The case of Greek default would predictably bring negative effect on Indonesia although only temporarily perhaps not more than one month. Indonesia had any significant bilateral business relationship with Greece.

Greece default would bring negative effect on Asian currencies including Rupiah so Rupiah would be under pressure at around Rp.13,300 – Rp.13.400 per USD.

Somehow Rupiah would not het any lower than Rp.13,500 per USD because the Government and BI would surely act although in fact there was not much that the Government could do to keep Rupiah from sinking any deeper because the Greek crisis was external factor; this was not to mention speculations that the Fed in America would increase FFR.

In fact the US Government did not like it either to see Euro fall because it might make USD to be see strong against other currencies as it might backlash on US export and worsen US export performance.

One thing was sure the Greek crisis would still be felt week especially when the new policy of the Greek Government was still in effect. Firstly all banks stopped their activities from June 28 to July 6. Secondly, bank customers were permitted to draw cash from ATM not more than €60 or USD 66 per day, per card and per account, but cardholders were permitted to draw cash using credit card or debit card abroad. Thirdly transfer or payment from a Greek bank to overseas bank was forbidden for the next week.

They also announced that the Regulation on liquidity could be extended for more than one week. One thing was sure that the faith of Greek banks was determined by the outcome of Referendum on July 5 last. Greek Prime Minister Tsipras decided to run a referendum to pocket people’s approval or rejection to the preconditions set forth by creditor countries. The referendum outcome would determine Greece status as member of the Eurozone.

Announcement of the Referendum outcome and tight liquidity brought anxiety to the people Greece and people’s trust was fading out. Long queque at the ATM and gas station was common sight in the cities of Greece. Moreover Fitch rating also demoted rating for four banks in Greece. Moreover Fitch rating also demoted rating for banks in Greece to “limited default” last Monday (29/6) as the Government commanded commercial banks to close for a week to make capital controlling.

Fitch stated that capital control including limitation to daw cash by customers was the same as “limited default” because limitation of deposit affected obligations banks senior executives. Four banks were demoted, all at CCC which means “very speculative” were National Bnak of Greece, Pireaus Bank, Euro Bank Ergesias and Alpha Bank.

The rating reflected high credit risk, because of execution of capital control or prospect of recovery in terms of default. Fitch lowered rating of same banks to below of or “Fail”.

Lowered rating reflected Fitch’s view that the banks had failed and would fail to pay before control was executed, because the banks were highly dependent on Europe Central Bank and decided not to increase liquidity because of the Government’s action.

At home in Indonesia, the external condition made it hard for Rupiah to go to below Rp.13,000,- per USD. Every effort to strengthen Rupiah lasted only for a moment because USD was still the main buyers’ target at the global market. The news of Indonesia growing by only below 5% (4.7%) in Q 1 2015 was disadvantageous to Rupiah through May 2015. The downturn was triggered by Janet Yellen’s statement that the US Central Bank would still increase FFR this year would suppress Rupiah.

The Capital Market

IHSG index rose by 12 points after fluctuating last week end (3/7). Slowly index was crawling last back to the psychological level of 5,000. IHSG inched down by 4.504 points (0.09%) to the level of 4,940.277 but bounced back again to the green zone. Negative sentiment from the global market overshadowed index movement. Meanwhile index of LQ45 strengthened by 3.536 points (0.42%) ri the level of 852,450.

Index fluctuated not long after opening session. The highest position was last week at 4, 960 and was projected to be closed at 4,970 – 4,990, Domestic investors made selective buying of premium shares while foreign investors tend to wait and see.

Most regional stockmarkets fell into the red zone being affected by negative sentiment from Wall street. Index of Nikkei 225 weakened by 68.25 points (0.33%) to 20,454.24. Index of Hang Seng inched down by 59.55 points (0.23%) to the level of 26.222.7 Index of Composite Shanghai dropped by 127.20 points (3.25%) to 3,785.57. Index of Straits Times inched up by 7.66 points (0.23%) to the level of 3,335.50.

Previously during transaction last weekend (29/6) IHSG nose dived to below 4,900. IHSG was opened to drop by 26.77 points to become 4,896.23 being affected by Greek problem. Investors responded negatively to failed negations in Greece.

As selling spree by investors at the stockmarket had not subsided, BEI was fluctuating quiet highly. The condition originated from domestic and overseas sentiment, moreover investors were now more prudent in investing their capital.

The psychological effect of Greek default could be more terrible than the real effect. As known, the condition of Greece today was full of political frictions. In Indonesia, the stockmarket was not too much affected by Greek case of default.

Investors needed not to worry too much about the negative effect of Greece crisis. IHSG index that fell this week was no sign that the condition of Indonesia’s stockmarket was in adverse condition.

So the domestic issue must be well managed and be observed by stockplayers. For example, the Loan-to-value policy for automotive credit would have positive impact on automotive credit would have positive impact on automotive sales at home. However the real impact would only be seen in Q III this year or by end of September.

Marketing performance was really unpredictable. Gaikindo only dared to set target for automotive sales at 1 million units and this was due to people’s low purchasing power. Basically the LTV Regulation promised ease to customers at early phase of credit. Although down payment was lowered by 5% against the previous 30%, the monthly installment increased.

The impact to investors was also seen after seeing consumer’s zest. It would be better if the LTV easing policy be accompanied by lowering of credit interest for automotives, but the impact for investors would be positive because with less down payment, people’s purchasing power would be stronger. The public must be seen whether they like low down payment with high installment, or high down payment with low installment, or high down payment with low instalment?

Transaction at the stockmarket would heighten with LTV easing for property and automotive credit. The easing was not only for KPR mortgage, but also for other consumer products including automotives which was a step to invigorate the market in the respective industry.

In the end energized automotive sector and their share transactions would propel economy to progress once more. On July 18 last, BI started to out in effect easing of LTV down payment and property credit.

For automotive credit BI had decided to lower Down Payment up to 5%. With relaxation of LTV, the automotive sector could accept acceleration of sales whereby to increase financing growth.

By April 2015, credit financing only grew by 7% (y o y). if the new LTV for automotive credit began, it was expected to turn into growth stimulus for financing, the automotive industry was slowing down in sales but still growing because sales of four wheel or two wheel vehicles was not only for new products nut also second hand products.

The potential growth for second layer shares was still open for Semester II. The sectors of trading, service and investment would be buoyed by annual cycle, i.e. the moment of Ramadhan, Lebaran and Christmas which increased household demand.

Besides, the policy for property ownerships for foreign citizens was predicted to increase demand for property.

In Semester II infra structure development by the Government and acceleration of budget absorption would begin to roll. Performance of the infra structure project would be driven by Government projects which would run and absorb fund faster. In case of mix industry the policy the policy of down payment easing would jack up sales. The consumer goods sector also had the potential to grow as investors believed that this sector was quite defensive.

Many analysts predicted that the five sectors: telecommunication, animal farming, banking, essential needs and infra structure in Q II/2015 would be positive. The five sectors were predicted inject positive sentiment to IHSG during last closing session at around 4,980 – 4,520. (SS) 

Business News - July 8, 2015

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