The situation of
moneymarket and stockmarket today was marked with negative impact from labor
unions’ demonstration demanding Minimum Provincial Wages [UMP] of 50%. As a
matter of fact some province stipulated increase of UPM below workers’ demand.
In the event that workers refused to comply to the UMP
increase stipulated by some Governors,
there was most likely to be more demonstrations bursting out. This would
certainly worsen the condition and generate negative sentiment in the market. In
the positive case when all workers’ problem would be solved, there was good
chance that Rupiah and IHSG would be stabilized by end of this week.
The Moneymarket
Rupiah value kept weakening against USD during morning
session last week [1/11]. Data of Bloomberg Dollar Index had it that Rupiah
inched down by 0.81% per USD. Rupiah weakening happened when USD. Rupiah
weakening happened when USD value was cross-checked against various currencies
in the Asia Pacific region.
Such also happened when the BPS Board of Statistics
announced inflation data through October 2013 at 0.09%. By year on year,
inflation touched the level of 8.32% year-to-date posted at 7.66%. In fact with
low monthly inflation there was opportunity for Rupiah to strengthen during
closing session last weekend in the range of Rp11,250 per USD; but because of
mounting laborers demonstrations in many cities, most probably Rupiah would be
suppressed to the level of Rp11,350 per USD. If things changed for the worse,
this Rupiah would still be stuck at Rp11,400 per USD. On the contrary if wages
problem could be settled, there was chance Rupiah would strengthen in the range
of Rp11,150 per USD.
Previously the announcement of budget axing to suppress
deficit in current transaction by the Governments of Indonesia and Malaysia
last week boiled down to strengthening of currency value of both countries.
Some moths ago Rupiah and Ringgit were deeply depreciated
against USD as there was anxiety that deficit in current transaction would
lower debt rating. Since May 1, Rupiah fell by 16%. Meanwhile Malaysian Ringgit
fell by 8.8% although it bounched up again; Ringgit was depreciated by 3.7%
since May 1.
Rupiah strengthened by 2.2% by end of October last to
become Rp10,910 per USD after the Government announced 2014 budget which
reduced next year deficit to become 1.5% of GDP against this year’s prediction
of 2.4%.
Some budget being saved like subsidy, would be pipelined
to infra structure building like public transportation. The Government
projected total expenditure 2014 would increase by 6.7%, less than this year
which was posted at 16.5%.
The only thing was that domestic economy was facing risk.
i.e. General Election next year which would bring new Government. The
Government themselves had lowered economic growth prediction from 6.35 to 6.0%.
However as for now, Rupiah value was improving after being stuck for a few
months.
Ringgit was being appreciated by 0.9% to become 3.1220
against USD after Prime Minister Najib Razak announced the Government’s plan to
axe Malaysia’s budget to 3.5% of GDP. Previously deficit was estimated at 4%
this year.
Malaysia was having budget deficit in the past 15 years.
When export posted downturn last June, it was a nightmare to some investors.
Fitch Ratings lowered Malaysia’s debt rating to negative in July after
increased debt and lack of fiscal reformation.
While promising increase of budget to moderate level and
expanding scope of subsidy which was the target of axing, the Malaysian
Government also planned to increase income by increasing goods and service tax
by 6.0% which would be effective on April 2015. Although Standard & Poor’s
rating agency had stated that the proposition would have no direct impact on
Malaysia’s investment rating, there was at least a sound measure to manage
fundamental problems which made investors feel pessimistic about Ringgit.
Budget axing by the Government of RI had the same impact.
The result was that currency of both countries had regained strength. Since the
widespread issue that America as planning to do Tapering off, fund managers had
repositioned their assets.
They were changing the their investment strategy by firstly
moving out of a developing country, including Indonesian, then reposition their
asset composition. In Indonesia, the condition had its impact on currency
fluctuation, although Rupiah movement was still in accordance with the regional
condition.
Some
analysts saw the pressures on Rupiah was not a matter monetary Quantitative
Easing in the USA which was an external factor. Deficit in balance of payment
and trade balance at home contributed to Rupiah movement.
While watching on deficit in current transaction and
soaring inflation policy of the monetary authorities in increase BI rate must
also be watched on. The policy of Quantitative Easing which was intended to
control inflation, stabilize Rupiah value and minimizing deficit in current
transaction which had the risk of injuring the real sector.
Banks would put brakes on credit pipelining while for the
real sector it would be hard to absorb credit of high interest today. Therefore
it was reasonable that when BI sets target of credit growth at 23%-24% it
finally dropped to 18%-20% in line with bank’s step to increase credit interest
according to BI’s benchmark rate.
The result was that there would be economic slowdown in
Indonesia as the real sector and investment would be burdened by high bank
interest. Besides, issue on Tapering off in the USA which would more or less
affect the financial market among the emerging nations including Indonesia. The
Government of RI must also watch on the trend of economic slowdown in China.
According to BPS data, Indonesia’s export value by August
2013 was posted at USD 13.6 billion, a downturn of 12.77% compared to July.
Compared to August 2012, it was a downturn of 6.31%. Meanwhile non oil-gas
export by august 2013 came to USD 10.39 billion, down by 18.88% compared to
July 2013. Compared to export in August 2012, it was a downturn of 7.78%.
The biggest downturn in non oil-gas export was in mineral
fuel USD 270.7 million, while highest increase was in gold & jewelries USD
66.1 million, while export of non oil-gas to China in August 2013 came to the highest
i.e. USD 1.48 billion, followed by Japan USD 1.06 billion and the USA 0.97
billion, the third contribution came to 33.77%.
On the other hand BI projected Rupiah value would be
stable in the short run after the Fed can celled their QE 3 plan, Indonesia
must still be on the watch out of rupiah by internal cause, i.e. swelling
deficit in current transaction and inflation pressures.
The internal factor which contributed to the process of
Rupiah weakening was swelling deficit in current transaction which touched 4.4%
of GDP in quarter II last. Other factor to be observed was inflation which on
yearly basis touched 8.40% by end of September and could be higher again by end
of 2013.
Somehow the Government reminded that BI rate of 7.25% be
maintained till end of year as an effort to enhance growth amidst tight
monetary condition which weakened people’s purchasing power. And yet amidst
economic slowdown, the Government was obliged to maintain fiscal monetary
stability which would make room for the real sector to develop.
The government through Finance Minister Chatib Basri also
stressed that confidence of the Indonesian people in Rupiah would have its
impact on international trust in Rupiah and national economy in general,
meaning Rupiah had its dignity, at home and abroad.
Finance Minister Chatib reminded all Indonesian people on
the importance of using Rupiah in every transaction in all of Indonesia’s
territory. All financial transactions in this Republic of Indonesia must use
Rupiah, expect for certain transactions were use for foreign currency was
inevitable. The national currency is a symbol of state’s sovereignty which
should be respected and all Indonesian citizen must be proud of Rupiah; Rupiah
had been accepted as medium of payment since independence day.
For that matter, Indonesia people’s confidence in Rupiah
would have its impact on confidence of the international community’ in Rupiah.
Every seller were forbidden to refuse Rupiah in all transaction where use of
Rupiah was compulsory.
Rupiah is extremely meaningful in the life of a nation,
for that matter all actions which had the intention to destroy Rupiah was not
permitted.
The Capital Market.
Meanwhile index of IHSG in the morning session last
weekend [1/11] weakened by 50 points due to heightening act of buying second
their premium shares. Index spent a long time at negative territory.
To start transaction, IHSG was opened to inch down by
31.737 points [0.70%] to the level of 4,478.179 being under pressure to sell
and must return to around 4,400. Index had negative sentiment from Wall street
which weakened last night.
Index nose dived since opening of transaction this
morning. Somehow index managed to turn positive for a moment, but sank again to
its lowest position at 4,450.398. Finally during closing session I last Friday
[1/11/] IHSG fell by 50.666 points [1.12%] to the level of 4,459.965. Meanwhile
index of LQ 45 fell by 9.142 points to the level of 745.665.
In short, IHSG was suppressed further to 1.12% to the
level of 4,459.97 by end of session I afternoon last week [1/1]. Such was when
data of Indonesia’s inflation on trade balance was announced. All through the
day index moved in the range of 4,450.39 – 4,518.65. of 480 shares transacted,
51 strengthened, 178 weakened and 25 remained stagnant.
Eight of the nine sectors at the Indonesia Security
Exchange [BEI] weakened by deepest downturn at the property sector posted at
2.3%. The only sector that strengthened was agribusiness 1.6%. Index of Bisnis
Indonesia [economic daily] version also dropped by 1.35% to the level of
373.39.
For information, at the morning session last week, BPS
announced inflation data through October 2013 at 0.09%. By year on year,
inflation touched the level of 8.32% and by year-to-date posted at 7.66%. A
notably positive data and could serve as catalyst of IHSG upturn.
Meanwhile majority sectoral index of the at the stock
hall was corrected expect one sector. Premium shares and sector tier shares was
the subject of investors’ act of selling. Sentiment from the weakening US and regional
stockmarkets, in addition to the Fed starting to do Tapering off started
marketplayers’ anxiety. Only thing was the announced of October low inflation
was sustainer of IHSG downfall.
Trading of shares in half a day of last weekend [1/11]
ran moderately with transaction frequency of 92,477 times at the volume of
2.533 shares worth Rp2.804 trillion. 52 shares rose, 176 shares dropped, and 88
shares stagnant. Stockmarkets of the Asia region were still moving the mixed
way with tendency to weaken. Only China’s stockmarket managed to strengthen.
Index of Composite Shanghai rose by 2.53 points [0.12%]
to the level of 2,144.14. Index of Hang Seng thinned out by 14.36 points
[0.06%] to the level of 23,192.01. Index of Nikkei 225 dropped by 174.03 points
[1.21%] to the level of 14,153.91. Index of Straits Times weakened by 15.9
points [0.47%] to the level of 3,195.48.
At the closing session last weekend, IHSG would be in the
range of 4,440-4,480; meanwhile over the week to move in the range of
4,430-4.470. It was still hard for index to break through 5,000 as negative
sentiment was still lurking around.
The only thing was that the banking sector as one of the
important pillars of Indonesia’s financial system was able to carve out
outstanding performance amidst inflation pressures and increased bank interest
and global economic uncertainty.
Starting this week till end of year, predictably shares
of the banking sector would be hunted by investors thanks to strong fundamental
support. To observe performance of quarter III/2013 which was only publicized
by high strata banks, it was clearly visible that the banking sector had strong
fundamental.
Such was clearly visible in various indicators. Net
profit of high strata banks was still able to post 2 digits growth in quarter
III-2013 compared to same period last year, credit, and third party fund which
rose between 20%-30% and fast growing assets. Bank Mandiri as the only bank on
the top ten list in Asean had asset of Rp700 trillion.
Big banks were still enjoying net interest margin above
5%, even 8%-9%. The good news was that non-performing loan was still under
control on the average below 1% amidst increased bank interest.
Based on BI’s report, the average Capital Adequacy ratio
of national banks was still high, reaching 17.89% per August 2013. Strong
capital indicated that banks in Indonesia were generally in solvent condition
with notable capacity to mitigate risk.
Stress test exercised several times by BI on banks
indicated that in terms of capital, liquidity or credit unveiled bank’s strong
resistance to various risk like economic slowdown, increased bank interest, and
currency depreciation.
Various indicators signaled that the banking industry in
Indonesia was most apetizing with profitability better than banks in other
Asean states. On the average ROE, ROA and NIM of Indonesia’s banks were
superior in Asean. With high achievement, performance of shares of the banking
sector were believed to be outstanding especially the first tier banks.
Impressive performance of banks in Indonesia made this
sector the target of foreign banks especially from Singapore, Malaysia,
Thailand and South Korea. High profitability tempted to prey on national banks.
Foreign banks were known to command over 50% of bank’s assets in Indonesia.
Five out of ten first tier banks in Indonesia were foreign banks and the 10
first tier banks commanded over the national banking sector was indeed
inevitable.
Unfortunately foreign banks tend to play in the
consumptive sector. A research proved that foreign investors in the banking
sector only had its short impact on efficiency, but in the long run the
positive impact would diminish. This must be observed by investors so they
could be selective in choosing banking shares.
In the future, national banks were expected to
consolidate shoulder to take command of the market, and be the master in their
own territory. National banks knew their market’s potential and knew the
consumers habit and behavior better than foreign banks. For that matter
national banks must upgrade quality of the human resources, by quality or
quantity. National banks must keep abreast with technology, expand network and
create innovative banking products.
The potential credit in Indonesia was still great in view
of the credit-to-GDP ratio which was only 31%. Many productive sectors were
waiting to be financed, from infra-structure to industry, service, micro, small
and medium business [UMKM]. The consumption sector was also attractive like
automotive and credit cards in line with the growth of lavish middle class.
Under the present circumstances, banks needed to be encouraged to expand
financing to export based business.
The only thing was that beside prospective banking
business, in the future there would be some risk to be observed.
Firstly, the risk of increasing NPL in line with
increased bank’s interest. NPL should be controlled at safe level so as not to
gnaw on capital. Increase of bank interest would slowdown credit expansion. On
the other hand credit expansion must be halted to minimize macro economic
pressures originating from deficit in current transaction.
Secondly, global economic uncertainty was still
overshadowing the market in line with the Fed’s decision to do Tappering off.
in this respect banks needed to step up capability to manage risk of higher
uncertainty, wheter in terms of credit, marketing or liquidity.
Although
BI rate had increased, it would not be justifiable for banks to increase credit
interest because it would stagnate economic growth. Besides, increase of
expenses would not erode NIM as long as banks were able to enhance efficiency.
Business News - November 6, 2013
