The Moneymarket
Indonesia’s, Taiwan and South Korea currencies took the
lead in weakening process the happened to most Asian currencies last Thursday
[29/1]. Of 11 currencies monitored through Bloomberg Dollar Index, 3 currencies
went up, 7 currencies slumped and one currency stagnated.
Currencies of South Korea, Taiwan and Indonesia posted
most significant upturn. Korean Won inched down by 0.88% to 1,093.95 per USD,
Taiwanese Dollar inched down by 0.81% to 31.51 per USD while Rupiah inched down
inched down by 0.76% to Rp.12,581.90 per USD. On the other hand Singapore
Dollar inched up by 0.10% to 1.35 per USD while Philippine Peso inched up by
0.03% to 44.09 per USD.
Strengthening of USD against other currencies was still
going on. BI predicted strengthening of USD might continue all year through.
USD during closing session was at Rp.12,573 strengthening against that in
opening session at Rp.12,515 due to QE by Europe and Japan.
ECB would throw out Euro which would make USD to
strengthen – not just against Euro but against all currencies including Rupiah.
Early this there was twin shock where all commodity prices slump, among them
oil which dropped to as low as USD 40 per barrel, lowered oil price its victim,
i.e. Russia.
The result was that Russia’s Rubbel nosed down to above
60% (ytd). Indonesia and Malaysia were having currency weakening but not as
severe as Rubbel. There were to forces that suppressed emerging countries i.e.
lowered commodity prices and strengthening USD.
With many uncertainties, most probably USD would continue
to strengthen. For example IMF had lowered global economic projection 2015 from
3.8% to 3.5%. Under the circumstances investors tend to seek for save haven
like the USD.
BI stated that revision of Rupiah value assumption from
Rp.12,200 to Rp.12,500 in APBN-P was still relevant with global condition.
With estimated strengthening of USD the assumed Rp.300
weakening was still in accordance with budget posture 2015. Change of exchange rate
assumption would govern size of state’s income in 2015. BI felt that Rp.12,500
per USD represented APBN-P 2015.
Beside the global factor, changed of assumed Rupiah value
would also consider the deficit factor which had been prevalent in the past 3
years.
For 2015, BI projected deficit in current transaction to
remain at above 3% of GDP due to enhanced infra structure building which would
trigger import of capital goods. BI would constantly observe the condition of
the moneymarket and focus effort on growth rated based on economic stability.
On thing to be watched on was increase of Fed Fund Rate
by the Fed in the USA around June 2015 which small as it might be (only 25 bps)
it would increase demand for USD in Indonesia.
So the challenge of this year was possible negative
impact from FFR increase. There would be high demand for USD through May-June
for repatriation of dividend, payment of coupon etc so the Government and BI
must watch out.
However, by end of year Rupiah exchange rate would not
break through psychological level since the potential of capital was quite high
because inflow of portofolio was quite sizable. Rupiah would be stable at Rp.12,000
– Rp.12,500 per USD till end of year.
Also worth observing was policy of the Singapore Monetary
Authority [MAS] which would slowdown the process of Singapore Dollar upturn
against other currencies, making Singapore the latest country to ease their
monetary policy.
Inflation rate which soared up globally made central
banks to panick and drive them to act even more than pessimistic predictions of
analysts. Economic slowdown in China, low inflation in the Eurozone and falling
world’s oil price increased global problems which forced the Central Banks of
Canada, India and Turkey to axe their bank interest this year to jack up their
economy.
Recently ECB extended their monetary policy aimed at
jacking up investment. MAS step to halt their Dollar flow which was unsuspected
by the market, done by way of lowering their currency exchange rate by 1.4% to
become S$ 1,3570 against USD. Singapore adopted the managed exchange rate
instead of bank interest as main instrument of their monetary policy.
Weakening of currency means increase of import cost,
timing of inflation and make export to be more competitive MAS disclosed that
the main reason for adopting the policy was to lower global oil price.
Supposedly steep downturn of oil price be beneficial to oil importer countries
in the long run by axing business cost.
However in the short run MAS was worried that lowered
price might cause deflation the way it happened in Japan over the past 15
years, according to MAS chances were small that oil price would soar up again
this year.
Some economists predicted that other central banks would
axe their interest lower in the next months. When China slashed their interest
last November, South Korea their lending rate twice last year. Japan also
extended their massive buying of asset aimed at monetary easing.
Although Thailand and Singapore maintained their bank
interest (28/1) many economist predicted the Malaysia Central Bank would axe
their bank interest this year. Thailand must also relax their monetary policy
due to weakening to export lesser domestic demand. Enhanced effort to jack up
economy through easing of monetary policy triggered currency devaluation in
Asia where countries were relying on export.
Although monetary easing were commonplace, Morgan Stanley
believed that Asian monetary authorities needed to be more aggressive because
to adjust to inflation level bank interest was still high.
The high real bank made it difficult for policy for
companies and households to pay debts which were high since global crisis of 2008.
Last weekend (30/1) Rupiah was still under pressure and was closed in the range
of Rp.12,560 – Rp.12,600 per USD. Pressures still continued over this week
(30/11) so Rupiah would still settle at around Rp.12,560 – Rp.12,620 per USD as
sentiment was low.
The Capital Market
The US stockmarket last Wednesday (29/1) was closed to
weaken. Index of Dow Jones Industrial Average was corrected by 1.13% while index
of S&P500 dropped by 1.35%. At Asia’s stockmarket, index of Nikkei 225
Japan weakened by 0.67% while index of KOSPI Composite Area (South Korea)
dropped 0.46%.
At home, there was unpleasant development when 14 State
Owned Companies (BUMN) might not get capital placement in 2015. It happened
when Commission XI of House received report from the Financial Examination Board
on BUMN which had not followed up the bad report card given to them. During
transaction last weekend (30/1). IHSG was predicted to be in support of 5,200
and resistance 5,300.
The good news was that ASIAN Stockmarket were opened
positive on the last day of January (30/11) Index of MSCI Asia Pacific inched
up by 0.3%. Hence through January reference index in the region came to 2.2%.
Positive movement of Asian stockmarket was this month supported by ECB to
inject stimulus following BoJ planning to run quantitative easing.
Acts of Central Banks was still the main them of this
year. US data kept improving while unemployment claim fell to its lowest level
in 15 years. It came as no surprise that he Fed was so optimistic of US labor
market. Index of Topix rose by 1% as ¥en was traded at 118,28 per USD. Meanwhile index of
Kospi South Korea and index of S&P/ASX 200 Australia inched up by 0.6%
while index of NZX.
Meanwhile the stockmarkets of China and Hong Kong were
not open yet. Through this month, index of Hang Seng Reference index was up by 4.2%,
while index of Sanghai Composite inched up by 0.9% while IHSG was reduced by 6
points amidst reluctant transactions. Index also moved within narrow range.
To start transaction, IHSG inched down by 5.317 points
(10%) to the level of 5,263.535. Index was carried away by negative sentiment
from weakening regional stockmarkets. Index was still unable to touch the green
zone since opening session. Selling spree was happening at all share levels.
The lowest level ever touched by IHSG was at 5,253.452. two sectors managed to
strengthen, i.e. construction and trading.
Finally during transaction at BEI last Thursday (29/1)
IHSG was closed low by 6.001 point (0.11%) to the level of 5,262,851. While
index of LQ 45 Inched down by 1.312 points (0.14%) to 910.382 as foreign
investors turned inactive.
At the same time wall street was closed positive, being
uplifted by up-crawling oil price. Shares of Apple and Boeing also went up
thanks to their good performance. Not all emitents made their mark but they
were compensated by sentiment from oil price.
Increase of oil price was not high, but good enough to
invigorate the market. Market sales was saturated, so it was good enough to
strengthen.
During closing session last Thursday (29/1), index of Dow
Jones strengthened by 225.48 points (1.31%) to the level of 17,416.85. Index of
S&P 500 increased by 19.09 points (95%) to the level of 2,021.25 while
index of Composite Nasdaq strengthened by 45.41 points (0.98%) to the level of
4,683.41.
At home, good news breezed out. Amidst global economic
uncertainty, customers needed not to worry about banks’ liquidity. All banks of
BUKU 1 to BUKU IV today had liquidity instrument against average core Deposit
(NCD) above minimum limit of 50%. BI’s data had it that ratio of liquidity
instrument against NCD of banks per December 2014 was posted at 91.6% this
ratio was bigger than the position per December 2013 at level 89,4%, meaning,
bank had ready cash in case customers needed it.
Liquidity check up by banks by other means also notably
healthy. Take for example ratio of ratio of liquidity ratio against Third Party
Fund (DPK) on 20 banks at level 19.10% while liquidity instrument against DPK
in other banks came to 19.11%. The ratio limit of 10%. This indicated that
banks had sound reserve obligations.
Banks liquidity was seen to improve. By December 2014
there was extra fund, further to be placed by BI. Now in January 2015, BI’ fund
was still resistant, as there was extra liquidity. Bank’s liquidity would be
safeguarded through 2015. The average banks liquidity would remain to above
50%. Although safe, OJK would keep monitoring bank’s liquidity regularly every
week.
Unfortunately negative news kept lurking on local
stockmarkets. DPP REI had asked the Government to review Regulations on
property tax including revision of classification of Super Luxurious Goods an
Sales tax for luxurious goods.
DPP REI stated that REI had known Government’s objectives
in pursuing income from taxation sector amounting to Rp.1,300 trillion, but the
Government must also consider how to make the property industry sector grow
well. REI had proposed to the Government how to increase income from property
tax.
Developers already felt there had been slowdown in sales
through 2014 which would predictably continue through 2015. REI feared that the
slowdown might generate chain effect on other industry sectors.
Previously the Director General of Tax, Ministry of
Finance was preparing revision for collection of “Income Tax for Extremely
Luxurious Goods” as written in the Regulation of the Ministry of Finance (PMK)
No.253/PMK/03/2008 dated December 31, 2008 on Tax Subject of certain
institution as collector of tax on “goods of extremely luxurious” category. The
Government was also scheming up amendment for Rule no: 130/PMK.011/2013 dated
August 26, 2013 on revision of P) MK No.121/PMK.011/2013 on Luxurious goods
beside automotive as subject to Sales Tax on Luxurious Goods.
DPP REI saw there was a discourse on change in taxation
on taxes of ground houses and land included in “extremely luxurious goods” from
the previous Rp.10 billion and for area of land of more than 500 sq meter to
become Rp.2 billion and area of land of more than 400 sq meter. Furthermore tax
on vertical housing classified as “extremely luxurious goods” from the previous
Rp.10 billion and for builing of more than 400 sq M would be revised to Rp.2
billion for buildings of more than 150 sq meters.
Selling price of ground Houses amounting to Rp.5 million
per meter (price of house plus land) and Rp.13.3 million per meter for
apartments categorized as “extremely luxurious goods”. REI felt that such
pricing platform was extremely impossible. Because selling price of modest
Rusunami houses in greater Jakarta alone was already Rp.9 million per sq based
on Government regulation no 3 year 2014. If the Government persisted to
exercised revision of the Regulation, property price of Rp.2 million would be
PPnBM tax imposed.
A condition as such would mean the property sector would
have to bear the burden of 45% sales tax broken down as: PPn 10%, PPnBM 20%,
Luxury Tax 5% and BPHTB 5%. This was no it to mention previous taxes to be
borne by developers like Cintractors Tax, land acquisition, Main certificate
etc, DPP REI would propose some solution to the Government.
Firstly the Government must accommodate REIT Transaction
(Real Estate Investment Trust), because the policy would drum up investors and
sizable fresh capital to increase income from the property sectors. As known,
other countries were maing the property sector as state’s source of income
sizable enough for the state.
Secondly, the Government could also make a policy to set
minimum selling price of property saleable to foreigners and impose higher tax
on them. Polemics over tax in the Property sector certainly means pressures on
developers and emitents.
Another bad news players of the coal industry sector
predicted coal business would be grim this year. Low selling price of coal and
legal certainty of the mining industry was hardet challenge for the industry in
2015. The Association of Indonesian coalminers expressed their grievances no
legal certainty while return ob investment was long.
The coal mining industry needed legal certainty, which
must be fair and just to coalminers and mining permit holders. Renegotiation of
PKP2B was exercised without observing miners interest and capability to build
smelters.
Meanwhile holders of Mining Permit (iUP) had to face
royalty increase which was notably high.
To illustrate, the Government’s Regulation No.9/2012 on
non tax income of the Ministry of Energy and Mineral Resources stipulated
Royalty for IUP coal between 3% - 7% depending on calorie degree. No the
Government increased Permit Royalty to 7% to 23.5% depending on the calorie.
The second obstacle was that selling price of coal
dropped, while production cost increased. The result was that some IUP holders
and PKP2B Jambi and South Kalimantan stopped their mining activities temporarily.
The condition caused excessive supply so it was hard to down press coal price.
So far illegal supply illegal coal might come to 60 million tons per year.
The fourth obstacle was that the domestic market shrunk,
while export was restricted. The fourth obstacle was that the process to
increase added value of coal had been stationary. With all the problem the
coalminers were expecting the Government to be more serious in managing coal
industry.
By end of January, price of coal increased, but players
of the industry was pessimistic it could be as high as 2 years ago. Coal
benchmark price was USD 63.84 per ton which was a downturn of 22.05% compared
to that of January 2014 at USD 81.9 per ton. To anticipate the case, many players
were running efficiency by renegotiating prices with contractors or suppliers
of oil fuel.
Pressures hardened after international financials
institution Goldman Sach axed projection of all commodity sectors. Goldman
lowered commodity sectors of energy, metal, plantation and animal farm to be
free of underweight in 3 months.
Although big downturn was posted for prices of
commodities, Goldman Sach predicted risk of commodities in the short run. Low
oil price could generate inflation which affected broader commodity prices.
Analysts predicted price of West Texas Intermediate (WTi) price would stay at
around USD 40 per barrel until Semester I 2015 which was due to slowdown of
supply and continuing capital investment in US shale gas kept continuing.
It was estimated that balance would be regained in oil
price by 2016 Analysts would increase prospect of commodity sectors from
neutral to over weight in the next 12 months. By ene of 2015 they saw that
stock would make rating to be neutral. The price increase was followed by
production margin which was estimated to become USD 65 for WTI and USD 7- for
Brent oil.
From the above picture by last weekend (30/1) IHSG would
stagnate in the range of 5,1245 – 5,275. Meanwhile this week there was slight
strengthening in the range of 5,260 – 5,320. (SS)
Business News - February 4, 2015
