AUGUST 2014 IDX: Fatigue Predicted for IDX Composite Index (IHSG)

Bisnis.com SEMARANG - Movement in the IDX Composite Index (IHSG) in August 2014 is expected to be sluggish, despite a potentially positive trend given the number of foreign investors who are following the political situation in the country.

PT Danareksa Sekuritas Branch Manager Semarang Melcy Makarawung said that a number of stock investors are still waiting for market certainty, following the July 9, 2014, announcement of the presidential election results by the General Elections Commission (KPU).

"Even though the presidential election results have already been announced, investor momentum is waiting for the official inauguration, which will affect markets and policy," he said on Tuesday (7/29/2014).

According to him, 65% of the country's investors are foreign capitalists, making political conditions a market benchmark.

"To ensure security for funds coming in from foreign investors," he said.

He said that, with this week's stock market holiday, there will be an estimated movement of 5,000 to 5,100 in the IDX Composite Index next week.

However, the market is predicted to follow annual trends, which tend to be sluggish, with the IDX Composite Index tending to be sluggish for August, affected by the momentum of Lebaran.

In the current situation, investors are still waiting for consolidation efforts from a number of political parties in response to the presidential election, which will in turn influence the composition of the cabinet and a range of policies including capital markets.

Danareksa Semarang leaders hope that the new government will now pay attention to rates for electrical power and fuel oil and create policies accordingly.

"If rate increases can be reined in, investment will then be safe."

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BALANCE OF TRADE: The Republic of Indonesia Will Have a Trade Deficit of US$200-400 Million for June.

Bisnis.com JAKARTA - The government estimates a trade deficit of between US$200 million and US$400 million for June due to increased imports heading into the Lebaran (Eid) holiday.

Finance Minister M. Chati Basri said that this deficit is part of an annual cycle to meet domestic O&G and non-O&G needs heading into Lebaran. On the other hand, manufacturing exports are not yet able to compensate.

As an illustration, June of 2013 saw a trade deficit of US$286 million. "Once again, this is temporary. People like to import during Lebaran. O&G needs are rising. People are traveling all around, and the demand for petroleum rises. Non-O&G demand also rises," he said on Friday (7/25/2014).

Previously, Bank Indonesia predicted a trade deficit of US$300 million for June and a slim surplus of US$70 million for the previous month.

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PERFORMANCE OF LISTED COMPANIES: Reports for First Half of 2014 Smooth, Projections of Profit Potential Rise

Bisnis.com JAKARTA - The encouraging performance report for listed companies for the first half of 2014 will potentially result in an increase in earnings projections in fundamental analysis. 

“Accumulated earnings upgrades have not been discounted by the market,” said HD Capital Senior Researcher Yuganur Wijanarko in the company’s weekly research.

He stated that there is potential for an increase in earnings projections in fundamental analysis to raise the ratings of listed companies, as well as in the fundamental JSX Composite Index (IHSG) target within the next 12 months.

This potential follows the release of financial reports for the first half of 2014 and the strengthening of the rupiah due to an inflow of funds following the Election Commission’s announcement of the president-elect.

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IDX Composite Index (IHSG) in Strengthening Trend, with Statistics Indonesia (BPS) Data Holding after Lebaran Holiday

Bisnis.com JAKARTA - Asjaya Indosurnya Securities estimated that the IDX Composite (IHSG) stock price index for medium-term trading is still in a strengthening trend.

William Surya Wijaya, Head of Research at Asjaya Indosurya Securities, expressed an optimistic conviction that the macroeconomic data to be released by Statistics Indonesia (BPS) after the Lebaran holiday will be positive.

“In the medium term, the IDX Composite Index is still on track for an uptrend,” stated William in his research. Investment conditions, he said, must be tailored to each investor’s timeframe.

The market is also awaiting further information in addition to what has been presented for this year's Lebaran holiday, as well as the release of economic data in early August.

Although economic conditions in the country are believed to still be stable, Williams stated that there is still a certain “current-account” wariness.

“Because it could be a pressure on the IDX Composite Index at some point in the future,” said William.

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PRESIDENTIAL ELECTION RESULTS LAWSUIT: President Susilo Bambang Yadhoyono Believes that the Process is Straightforward and Secure

Bisnis.com, JAKARTA—In spite of the Prabowo-Hatta Rajasa lawsuit regarding election results submitted to the Constitutional Court on Friday (7/25/2014), President Susilo Bambang Yudhoyono believes that the presidential election process can be run securely.

“I defer to the Constitutional Court for the processing of this case jointly submitted by Prabowo and Hatta Rajasa, which is something completely unremarkable. Remember the previous election in 2009; neither the running mates Mrs. Megawati and Mr. Prabowo nor nor the running mates Mr. Jusuf Kalla and Mr. Wiranto would accept the results announced by the General Elections Commission (KPU), and so took the matter to the Constitutional Court. The Constitutional Court also proceeded with transparency and accountability,” said the President in an interview uploaded to the YouTube website as quoted by Antara in Jakarta on Saturday (7/26/2014).

The President calls upon the people to provide oversight for the Court to ensure that it is doing exactly as expected. Despite the claims made to the Constitutional Court, the President believes that the entire process will go well and in accordance with the expectations of the people.

“The important thing is that Mr. Prabowo and his supporters and constituents maintain a period of quiet and respect the processes undertaking by the Constitutional Court. So my message and my comments are that I still have faith that everything will be processed properly,” he said.

Earlier, on Friday night, Prabowo Subianto and Hatta Rajasa came to the Constitutional Court Building to monitor the registration for the election dispute lawsuit, accompanied by a number of senior party officials from Koalisi Merah Putih (“Red and White Coalition”).

Prabowo and Hatta arrived at the Constitutional Court at 7:30 PM, greeted by an activist group composed of hundreds of volunteers and supporters who had been waiting in front of the Constitutional Court Building since noon.

Prabowo and Hatta did not enter the Constitutional Court Building. They only greeted their hundreds of supporters and urged all of them to go home and entrust the process to the legal team.

“Our legal team has sufficient evidence – nearly one million documents and 52,000 witnesses – and we will forward this to the Court. Let us therefore be calm and return home in an orderly fashion, and let us finish our fast and celebrate Leberan in peace, and after that, we will continue to fight to defend the Republic of Indonesia,” he said, appealing to his hundreds of supporters.

Something similar was expressed by Hatta Rajasa, who arrived in the same car as Prabowo. Hatta stated that the Koalisi Merah Putih team wants all struggles to be resolved in peace, tranquility, and dignity through constitutional and lawful channels.

In attendance at the Constitutional Court Building, Prabowo and Hatta were accompanied by a number of senior Koalisi Merah Putih party officials, including Aburizal Bakrie, Idrus Marham, Akbar Tandjung, Tantowi Yahya, Hidayat Nur Wahid, Fadli Zon, Ahmad Muzani, Ahmad Yani, Ali Mochtar Ngabalin, and others.

Firman Wijaya, Prabowo-Hatta Legal Team Chair, said that, in its registration of the lawsuit, the party has included technical documents in the form of 52,000 C1 documents and a video recording.

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Ahead of the Lebaran Holiday, These Are Stock Sectors that Deserve Attention

Bisnis.com, JAKARTA - Approaching the 1435 H Lebaran (also Idul Fitri or Eid) vacation next week, the rate of consumption usually increases.

At the same time, there is usually a weakening effect on profit-taking for trading in capital markets. A need for cash funds often causes a number of market participants to choose to exit the market for a while.

Once the holiday has ended, investors reorganize their portfolios once again. Of course, in these conditions, we must be careful in the selection of sectors and stocks in which to invest. The research team for Daewoo Securities Indonesia has identified a number of sectors that require attentiveness because they will be affected by this condition. These sectors are:

Which sectors are most affected by the aforementioned matters?

• Banking: Credit distribution has improved, but the growth in public reserves slows in the months leading up to Lebaran.
• Automotive and finance: New and used car sales, for MPVs in particular, will increase, and the majority of purchases will be made with credit.
• Consumer and retail: Sales in consumer sectors for companies such as Indofood and MYOR will increase, as well as for retailers such as MPPA, RALS, and LPPF.

Daewoo Securities has determined that, also taking into account the end of the 2014 presidential elections, the third-quarter performances of listed companies in the sectors mentioned will be better than their second-quarter performances.

"If you have looked at recent news, you have seen a variety of news items regarding the repair of roads and bridges to facilitate smooth returns home, as well as increasingly dense traffic flows and crowded shopping centers as Lebaran approaches," the team explained in its Friday research (7/25/2014).

It is no wonder, they added, that the money supply would increase. In July 2013, the Daewoo Securities research team showed in a visual how the money circulated by Bank Indonesia reached Rp 506 trillion, with an average increase of 15-16% every year. As for the money supply during Ramadan and Lebaran, it reached Rp 103.1 trillion, an increase of 17.4% compared to the previous year.

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Indonesia Stock Exchange Questions BMTR’s Guaranteed Shares in MNCN

Bisnis.com, JAKARTA – The Indonesia Stock Exchange (BEI) questioned the guarantees of shares owned by PT Global Mediacom Tbk. (BMTR) in PT Media Nusantara Citra Tbk. (MNCN) on loans obtained by BMTR worth US$127.5 million.

In order to disburse the loan to PT MNC Kabel Mediacom (MKM), the lender – the China Development Bank Corporation (CDB) – requested that BMTR guarantee 150% of the value of the loan plus the valuation of the MNCN shares.

MKM is a company controlled indirectly by BMTR.

This answer was delivered by Syafril Nasution, Corporate Secretary of BMTR, through a disclosure of information on Wednesday (7/23); said letter requests clarification from the Indonesian Stock Exchange (IDX) for July 2014.

Via the prospectus, published Monday (7/14), BMTR has stated that MKM has received a loan of US$127.5 million from the CDB.

This loan has a tenure of 7 years, until 2021, including a grace period of 3 years starting from the agreement’s date of execution.

The loan interest rate amounts to the margin added to the 6-month LIBOR interest. A margin of 485 bps without Sinosure insurance or 345 bps with Sinosure insurance is payable every 6 months.

Regarding the loan, BMTR provides a corporate guarantee and backs a stake in PT Medina Nusantara Citra Tbk. (MNCN) amounting to an equivalent of 150% of the loan value, or US$191.25 million.

Loan funds shall be used to finance investments and working capital to develop a network based on fiber optics.

If the MKM project is not on target, BMTR may then lose ownership of the pledged shares in MNC.

“And lose the opportunity to use the guaranteed shares in MNC whenever the company itself is in need of funding,” wrote Syafril.

BMTR is confident in the success of MKM’s fiber optic-based network development project. Therefore, MKM shall provide fiber optic-based network services with fiber-to-the-home (FTTH) technology into the center of many areas where fiber-optic services still do not reach.

In addition, the penetration of subscription television and broadband Internet remains low and unevenly distributed in Indonesia.

The company intends to become the largest media firm and have the most comprehensive service base.

This includes free-to-air television, subscription television by satellite dish, and subscription television and data communications over cable network, in addition to online media, printed media, and radio.

“The company also can create synergies and bundling that will have a positive impact on the company’s growth and the efficiency of its business units,” said Syafril.

The growth of MKM is expected to contribute to revenue, EBITDA, and net income for BTMR beginning in 2016.

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TELECOM PERFORMANCE: 8.42% Revenue Growth for the First Half of 2014

Bisnis.com JAKARTA - PT Telekomunikasi Indonesia Tbk. (TLKM) saw a revenue increase of 8.42% in the first half of 2014, reaching Rp 43.54 trillion (US$3.79 billion), up from Rp 40.16 trillion (US$3.49) in revenue for the first half of 2013.

Telecom operations, maintenance, and services constitute the largest load.

Said load grew by 9.97% in the first half of 2014, reaching Rp 10.7 trillion (US$0.93 billion), up from a total of Rp 9.73 trillion (US$0.84 billion) for the same period last year.

The company recorded a net foreign exchange loss for the first half of 2014 amounting to Rp 146 billion (US$12.68 million), dropping from a foreign exchange gain for the first half of 2013 of Rp 100 billion (US$8.69 million).

The rupiah is the operational and bookkeeping currency for the company and its subsidiaries, except for Telekomunikasi Indonesia International Pte. Ltd. of Hong Kong, Telekomunikasi Indonesia International Pte. Ltd. of Singapore, and Telekomunikasi Indonesia International S.A. of East Timor, which all use the U.S. dollar.

As of June 30, 2014, the company uses a buy rate of Rp 11.845 per U.S. dollar and a sell rate of Rp 11.865 per U.S. dollar.

Despite the increased load and exposure to foreign exchange losses, the company has been able to raise the bottom line.

In the first half of 2014, the company pocketed a net profit of Rp 7.41 billion (US$640,000), up 3.93% from the net profit from the first half of last year, which was valued at Rp 7.13 billion (US$619,000).

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*Translator's note: Yes, the net profit seems like nothing for a company with revenue like this, but I double-checked the numbers, and that is what the source says.

China Recommences Discussion of Structural Reform Program

Bisnis.com, BEIJING - The internal government of China is beginning to show concern about how the country’s agenda to prepare a stimulus package in order to pursue growth targets actually obscures its main goals, such as economic reform.

In November 2013, the government issued an urgent agenda of structural reform for implementation. The government’s focus switched to the stimulus after the reports from the first quarter of this year confirmed a third consecutive quarter of declining growth for the country of the panda.

On Reuters, a member of the government council conveyed the conclusions of an internal think-tank, stating that all efforts to boost growth have already been carried out, and that the time has now come for China’s management to return to economic reform.

Tremendous efforts to jump-start the economy are no longer required. We must now focus on reforms, said Xu Hongcai, senior economist at the China Center for International Economic Exchange, in Beijing on Tuesday (7/22).

One of the next steps that must be taken by the government is to reform its fiscal system, which is tailored to the size of the local government debt.

The economists who participated in the government think-tank issued reforms expected to eventually accelerate growth over the second half of this year. President of China Xi Jinping, according to the government council, also supervised the preparation of the reform plan by various Chinese government agencies.

Last week, the Chinese government published data of 7.5% growth in the country for the second quarter of the year, which constitutes the first expansion after experiencing three quarters of contraction. This increase is considered to be a direct result from the government’s mini-stimulus disbursement.

It appears that GDP growth will continue into the second half of this year. Of particular concern is the government’s move to let the market determine the price while productivity is still weak, said Rob Subbraman, Nomura economist.

As for the stimulus measures that have been carried out by the government, these include reducing bank reserve requirements, accelerating national and local government spending, and expediting railroad and housing construction.

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