Amidst economic slowdown at
home and slow recovery of global economy, it was important for the Indonesian
Government to regain market trust which faded lately. The objective was to
regain Rupiah supremacy against USD which over the year was depreciated by
around 11%.
Some macro economic aspects needed restoration and the
market needed to be informed about it so trust could be regained. For example,
how to manage overseas debt (ULN) to keep it within safe level. As known, by
end of Q II 2015 when growth was 6.3% (y o y) growth if ULN was slower than
growth of Q I-2015 at 7.9% (y o y).
Overseas debt by end of Q-II-2015 was at the position of
USD 304.3 billion consisting of the public sector USD 134.6 billion (44.2% of
total UN) and ULN of the private sector USD 169.7 billion (55.8% of total ULN).
Slowdown in ULN growth was posted in the private sector,
and 13.4% (y o y) in the past quarter to become 9,7% (y o y). by that
development, DSR turned better from 56.9% in Q I-2015 to 56.3% in Q II-2015.
Other points was commitment by ministries/institutions to
accelerate budget absorption. President Joko Widodo was outrageous that budget
absorption was only 20% while now it’s already August. The President commanded
the Ministries to focus acceleration of capital expenditure.
Besides it was advisable for the Government to make
overall deregulation to ease procurement of goods and services, investment, and
business permit. All regulation like Government Regulation, Presidential
Regulation and Ministrial Decree which were obstacles would be axed.
The President also asked the Minister of Internal Affairs
to speed up liquidation of Rp.270 trillion held at Regional Development Bank
(BPD) so the village fund could be liquidated. The Government also prepared an
“anti-criminalization” regulation to protect local leader who wished to
liquidate their money.
They way it had been, some Provincial Leaders were afraid
they could be suspected of corruption so fund stayed idle at BPD. In
particular, the President also instructed the Ministry of Finance Bambang
Brodjonegoro to focus attention on acceleration of budget absorption at
Ministries because it was the propeller of economic growth.
It’s already August, but capital expenditure of the
Ministries only reached 20% of budget of around Rp.275 trillion in APBN-P 2015
while budget absorption as a whole was posted at around 50% of state budget of
around Rp.1,984.1.- trillion. To be exact: realization or more per August 19
last, or 50% more than APBNP target of 2015 at Rp.1,994.1.- trillion while
realization of state’s income was 56% of the targeted Rp.1,761.6.- trillion.
By nominal the ministries contributing most in the
realization of state’s expenditures were: the Ministry of Public Works and
People’s Housing (PUPR), the Ministry of Defense, and the Ministry of
Transportation. The Ministry of Finance was also trying to increase income from
tax target were not met, fiscal deficit might widen to 2.1% - 2.2% of GDP
although still below 2.7% of GDP.
Meanwhile the Ministry of Public Works (PUPR) had
absorbed fund of Rp.31 trillion or 21.7% until August 20, 2015. The real
projects not being put in tender was posted at Rp.4.2 trillion meaning there
was 4% of the entire project. The Ministry was optimistic about absorbing 30%
of budget by end of August. The projects being aimed at were connectivity
projects like: road, dams and reservoirs.
The Moneymarket
Rupiah value exchanged at interbank transaction in
Jakarta on Friday (21/8) weakened by 29 points to become Rp.13,914 against the
previous position of Rp.13,885.- per USD. The Fed being uncertain about timing
to increase FFR made marketplayers feel more comfortable to hold USD.
In the present condition, even if Rupiah strengthen it
would be but temporary because the sentiment from the international tend to be
negative. However, monetary operations run by BI could ease pressures o Rupiah.
BI was reported to run some strategies, among others to
tighten Rupiah liquidity in the moneymarket, buy SBN Promissory Notes at the
secondary market and change the mechanism of Reverse Repo from Variable Rate
Tender to Fixed Rate Tender.
Indonesia’s economic data was expected to post better
result than before. Indonesia’s economic growth rate tend to slow down: in Q II
2015 Indonesia’s economic growth was only 4.67%, lower than previous attainment
at 5.03%.
Last week (21/8) Rupiah’s downturn against USD had been
quite dramatic. USD swung up ad down like roller coaster. In the morning
session USD was opened to strengthen to Rp.13,875 compared to transaction on
Thursday (20/8) at Rp.13,870.- but not long thereafter Greenbuck solidified to
reach its highest level at Rp.13,945.-.
After soaring up high suddenly USD slumped to as low as
Rp.13,835.- per USD against the day before. All of a sudden soared up again to
around Rp.13,940.- per USD.
Rupiah value against USD was constantly under pressure.
Rupiah weakening had been constantly under pressure due to external sentiment.
Investors rushed to keep USD and Third Party Fund was dramatically under
pressure. The world’s unimpressive economic condition also had its influence on
countries of the emerging market including Indonesia. China responded to the
global condition be deliberately weaken
Yuan by more than 2% to jack up export and keep economy growing but weakening
of Yuan pushed Rupiah down.
Not just China, the Central Bank of Vietnam also followed
China to weaken their currency. The objective was the same, to encourage
Vietnamese exporters be more aggressive in exporting. Three days ago the
Central Bank of Vietnam, devaluated their money to become Dong 21,890 per USD,
they also broaden their trading range to 3%.
Apparently the Vietnamese Dong had been devaluated three
times by the Central Bank. In the previous week the State Bank of Vietnam had
broaden the transition range of their currency from 1% to 2%.
The condition was predicted to continue till year end;
besides export increase was not significant. In the end economic slowdown
suppressed performance of domestic banking.
Today BI and OJK were adopting policies to improve the
financial sector. Now it was left for the Government to be more aggressive in
spending state budget for better growth.
The Minister of Finance Bamabang Brodjonegoro believed
that Rupiah was under pressure of global adversity which also suppressed
currencies of the emerging states. The Government and BI was fostering teamwork
to solve problems.
The following information explained why Rupiah was
constantly under pressure. According to Coordinating Minister Economy Darmain
Nasution, the out following fund which tend to be high in Q III-2015, in
addition to currency was eroded Rupiah which during transaction on Thursday
(20/8) fell to the level of Rp.13,900.- per USD. Market psychology posed as
additional pressure.
Beside being at mid year, the time for companies to send
their dividend abroad, uncertainty of the Fed increasing FFR in America
generated its negative effect on Indonesia.
Somehow the trend of Rupiah weakening would not last too
long because the Government had taken anticipated measures to block capital
from further outflow. One of the actions was to accelerate realization of
infra-structure projects whereby foreign capital might be pulled in.
Strategic projects like urban transportation System known
as Light Rail Transit (LRT) would be accelerated. The presidential Regulation
Plan for LRT had been submitted to President Joko Widodo last week.
BI also solidified the Government’s policy by restricting
purchase of USD in Indonesia; this was to minimize pressures on Rupiah. The
Government had so far only regulated buyings of Green buck above USD 100,00,-
per month; soon it would be lowered further to USD 25,000 per month, which
means if a person or company made purchase of above USD 25 thousand per month
he would have to complete certain underlying transaction be mandatory for him
to report underlying transaction and insert taxpayer ID Number (NPWP).
From the above picture there was chance for Rupiah to
gain some strength (21/8) to around Rp.13,825.- – Rp.13,875.- per USD while
Rupiah would this week move in the range of Rp.13,770.- – Rp.13,875.- per USD
with tendency to strengthen.
The Capital Market
Since most of the stockmarkets in Asia including China
weakened by more than 3%, index of IHSG and BEI during closing session on
Thursday (20/8) weakened by 42.33 points (0,94%) to the level of 4,441,91.
Meanwhile index of LQ-45 weakened by 8.47 points (1.12%) to the level of
747.93. the Syariah based index as part of ISSI dropped by 1.23 points (0.86%)
to become 141.44.
Transactions was posted at the volume of 3.336 billion
lots worth Rp.2.994.- trillion reaching the highest level of 4,473 and the
lowest 4.427.63 shares strengthened, 240 shares weakened and 73 shares
stagnated.
Weakening of IHSG was simultaneous with regional
stockmarkets like Asia Pacific excluding Japan; MSCI was down by 12.47 (0.43%)
to the level of 860.56. Index of Nikkei Japan was closed to inch down by 189.98
(0.94%) while Shanghai SE Composite in China was closed to weaken by 129,82
(3.42%) to reach 3,664.29.
Meanwhile index of Hang Seng in Hong Kong was closed to
fall by 410.38 (1.77%) to become 22.757. index of KOSPI in South Korea was down
by 24.83 (1.28%) to become 1,194 and index of Straits Times Singapore was down
by 29.85 to 3,011.40.
To continue to initial session on Friday (21/8) during
transaction of Session 1 IHSG was constantly under pressure and moved to the
red zone. IHSG during end Session 1 weakened by 91.16 points to fall by 2.05%.
40 shares strengthened and 42 shares stagnated. The total shares being
transacted was 1.84 billion lots with transactions totaling Rp.1,85 trillion.
Index of Investor 33 weakened by 5.94 points or down by
1.93% to the level of 301.24. index of LQ 45 weakened by 16.13 points or down
by 2.15% to 731.8. IHSG during closing session last week end (21/8) was at
4,450 – 4.475.
So amidst downturning trend today, many analysts
recommended short term trading with high stop lost.
With lack of positive sentiment from without or within,
IHSG and BEI Jakarta this Friday continued weakening by 40.24 points or 0.91%
to become 40.24 points (0.91%) to become 4,401.66. Meanwhile LQ45 descended by
10.30 points (1.38%) to become 737.63.
Marketplayers were expecting that the policy adopted by
OJK to permit emitents to buyback their shares could ease pressures on IHSG and
reduce market turbulence.
In spit of net selling by foreign investors, the
condition of Indonesia’s stockmarket today was quite satisfactory in times when
the Fed increased FFR. Weakening of IHSG by 15% was because there was no big
investors to support it.
The present condition was different from that of some
years ago. When Jamsostek was not BPJS it contributed a great deal to sustain
IHSG. The role of Jamsostek was today no longer significant because they
focused more on servicing than investing. The effect became significant when
foreign capital flew out of the country even in not too sizable amount.
The present global condition was today still negative
toward the Fed increasing FFR while Indonesia’s economic condition was not
becoming any better. BI was also waiting until FFR was really up, then only to
adopt a policy more supportive to national economic growth. So IHSG was
predicted to ascend to 4,750 – 5,000 till end of year. Hopefully IHSG would
rebound by September.
The argument was based on the belief that the exit of
foreign investors from the domestic market was only temporary this was because
USD was constantly gaining strength and many investors were turning to other
instruments like USD, bonds, of gold. So domestic investors should not panic
under the present circumstance. They could net buy shares at low price left by
foreign investors.
Strengthening of USD in tandem with depreciation of Yuan
lately need not be responded with over anxiety. Moreover the Fed might cancel
increasing FFR as China’s Central Bank devaluated Yen; hence the fear of
possible sudden reversal could be minimized.
Since early this year IHSG was already minus 15%, but
IHSG had the potential to regain strength when the Fed continued to increase
interest rate till year’s end so the chance for IHSG to rise was open wide.
Some emitent of certain sectors were still prospective such as the financial
sector, property, retail and basic industry.
In the long run, emitents of cement, iron and steel,
construction, and transportation industry would strengthen in line with infra
structure projects run by the Government. With volume of RAPBN 2016 amounting t
Rp.2,121 trillion of which Rp.313.5 trillion was allocated t infra-structure it
would certainly was allocated to infra-structure it would certainly strengthen
optimism that IHSG would move up to around 4,475 – 4.525 over this week. (SS)
Business News - August 26, 2015
