Bank Indonesia, Govt see limited impact of Brexit vote on Indonesia’s economy

Photo by The Insider Stories

JAKARTA (TheInsiderStories) – Bank Indonesia (BI) and the government stated that the Britain’s Exit (Brexit) vote which decides that UK leaves the European Union will have limited impact on the Indonesian economy and only give a short term shock to the financial market. Both BI and the government argue that in term of trade relation, the amount of export and import between Indonesia and United Kingdom (UK) is small.

The global markets have different reactions to the Brexit vote. Some global investors move their investments from European market to the countries that have relatively healthy economies such as United State and Japan.

In mid day trading, the Japanese Yen soared 7.2 percent to as high as ¥99.00 against the U.S. dollar compared to yesterday, its strongest level since November 2013. While, the British’s pound  fallen to the lowest level since September 1985 at the level to $1.3230.

In domestic market, the Jakarta Composite Index (JCI) and the Rupiah stumbled at the end of mid day trading. JCI plunged 2.3 percent at the mid day trading before closing at 4,834.57 or dropped 0.8% compared to yesterday level. The rupiah slumped by 1.08 percent to Rp13,391 to the US dollar from previous day at Rp13,248. 
Coordinating Minister for Economic Affairs Darmin Nasution said Indonesia has a good relationship with UK and EU countries. The vote result is surprising for everyone and shocked both stock market and foreign exchange market.

“However, we believe our capital market will quickly recover,” he said, adding that the impact on money market should also be limited. He said, citing World Bank report, Indonesia’s economy is relatively resilience toward external upheavals.

He added Indonesia need to be on alert in the next few days and monitor the market closely. The government and Bank Indonesia will work closely to deal with this condition.

Bank Indonesia Governor Agus Martowardojo said in the current condition global investors decided to “fly to quality”. He said Indonesia can weather the global turmoil following the Brexit vote as “Indonesia’s economy remains in good shape.”

He said there will be lengthy process before UK leaves EU as there is EU treaty. UK will have to make a demand to leave EU and there will be negotiations on tariff, migration, non-tariff barriers and so on. “It could take 2 years and its implication could last long,” he said.

Agus Martowardojo also said Indonesia’s economic indicators remain under control. Inflation in June is expected to be around 0.56 percent, pressured by a rise of food products. Current account remains in good condition. “In general, our economic condition is in good shape and we can encounter this condition. We will make sure that this (Brexit vote) will not bring about negative impact on Indonesia’s economy,” he said.

Finance Minister Bambang Brodjonegoro also believes that the pressure on stock market and financial market is temporary. He said UK is one of an important member of EU. Its GDP is second largest after Germany. EU’s bargain power and strength as an economic union could decline without UK in it.

When asked about the impact on Indonesia’s economy, he said the vote results have no direct impact on Indonesia. This may cause market jittery, but that should be temporary. (*)

 

The post Bank Indonesia, Govt see limited impact of Brexit vote on Indonesia’s economy appeared first on The Insider Stories.

Source: The Insiderstories
Bank Indonesia, Govt see limited impact of Brexit vote on Indonesia’s economy

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UOB Note Flash: UK walks out of the EU

On 23 June 2016, the United Kingdom (UK) voted by referendum to leave the European Union (EU). Financial markets have correspondingly reacted to the preliminary results, with the Sterling pound falling by about 10% against the US dollar to its weakest level in over 30 years. Asian equities also fell, with Japan Topix Index plunging 8% and Hong Kong’s Hang Seng Index dropping 5%. Closer to home, the Straits Times Index was down 3%.

With UK leaving the EU, expectations are that it will now invoke Article 50 of the 2007 Treaty of Lisbon, and begin a potential two-year negotiation period to set the terms by which the UK “withdraw(s) from the EU in accordance with its constitutional requirements”. The initial reaction by financial markets is expected to be sharply negative due to the uncertainties that could be unleashed by major changes to the structure of the EU, and the immediate impact on market confidence and economic behaviour.

In the aftermath of the UK’s “Leave” vote, EU leaders may take the unprecedented step of calling an emergency summit without UK representation. Nonetheless, an EU summit is already scheduled in Brussels on 28-29 June 2016. Cameron is still expected to represent the UK at the Brussels summit, although his position as Prime Minister is clearly in jeopardy. However, before that, investors will take heed of a Spanish general election on 26 June 2016. A strong showing by the left-leaning Podemos party may pressure EU leaders to re-examine the expansion of EU powers under the Lisbon Treaty.

The medium to long term effects of the UK vote are difficult to quantify. In the near term, we are more cautious on the outlook for risk assets, and equities in particular. We believe it will be increasingly difficult for risk assets to perform until the ongoing issues related to the exit are clarified and evidence shows limited spillover to the global economy.

While it is possible that market anxieties about Brexit will moderate by end of 2016, structural changes underlying UK-EU relations would need time to gestate. While immigration is likely to have little or no direct economic impact in the short run, trade and investment may be adversely impacted over the medium to long term. On balance we view the risks to the real economy and markets as being significant as the exit process means more uncertainty and friction on the horizon.

There will be headwinds along the way. First is the lack of clarity in trade and economic relations between UK and Europe. This uncertainty will persist for some time. Consequently, decisions on business investment may be placed on hold until there is visibility over the UK’s trading relationship with the EU. This will likely weigh on future business investment into the UK.

Another concern is the possibility of other EU member countries such as Holland, Sweden, and Italy calling for their own referendums. This could become the catalyst for a greater transition of the EU structure, again adding to uncertainty. Lastly, the UK is a significant contributor to the EU’s overall budgets and extricating the UK’s share and reallocating it accordingly is likely to be politically messy for the EU.

Asset allocation update

Given our concerns about the UK exit from the EU, we downgrade our recommended equity allocation to underweight and raise our fixed income allocation to overweight.

We continue to advocate lower beta positions within equities. We are overweight on the US, and underweight on the UK and Europe in our current asset allocation.

Within fixed income, we remain defensive. We are tactically overweight on duration. We prefer high quality corporate credit and remain cautious on high yield.

We remain underweight on commodities, with a preference for gold.

We are also overweight on cash. We expect gold, government bonds and the US dollar to benefit from this risk aversion.

The UK exit is likely to create a protracted period of uncertainty in financial markets, and will likely have negative implications on growth prospects for the UK and potentially elsewhere. We will look for evidence that market conditions are stabilising and that the global growth outlook improves before raising our risk positioning in our Tactical Asset Allocation (TAA).

The post UOB Note Flash: UK walks out of the EU appeared first on The Insider Stories.

Source: The Insiderstories
UOB Note Flash: UK walks out of the EU

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Karena Aktifitas Pemodal Asing Tidak Terlalu Besar…*

Selamat sore…

Kalau Anda heran.. mengapa IHSG tidak terkoreksi terlalu dalam sore hari ini ketika Brexit.. IMHO… alasannya adalah karena aktifitas dari pemodal asing memang sedang tidak terlalu besar.

Karena aktifitas asing tidak besar, maka posisi asing tidak besar.  Karena posisi asing tidak besar, maka saham yang bisa dilepas juga tidak besar.  IHSG jadi tidak besar turunnya.

Harus kah kita bersyukur?

Hmm… setidaknya… sekarang kita boleh bangga : market kita.. penguasanya adalah pemain lokal.

Bagus enggak ini ya? Sehat enggak ini ya?

Ah… itu gak penting.  Yang penting… kita tidak menderita terlalu besar seperti yang terjadi pada bursa lainnya di kawasan Asia.

Happy trading… semoga barokah!!!

Satrio Utomo

*disclaimer ON

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15.45*

Selamat sore…

Masih banyak sebenarnya… pertanyaan tentang Brexit yang belum terjawab.  Termasuk: bagaimana pengaruh brexit terhadap market Amerika?  Bagaimana Market Amerika bereaksi terhadap Brexit?

Market Asia sedikit rebound dari kondisi terburuknya.  IHSG juga.  Akan tetapi… apakah beli di sore hari ini merupakan langkah yang rasional?  Terus terang saya tidak yakin.  Kecuali mungkin… kalau harganya didekat (atau malah dibawah) intraday low saat ini.  Disitu baru dirasakan menarik.

So… sore ini saya masih full cash.  Kecuali kalau IHSG nanti ditutup di posisi lowest… ya mungkin saya bisa dapet barang.  Akan tetapi… pada dasarnya… saya nggak kepingin positioning dulu.  Masih banyak ketidakpastian, seperti apakah Brexit ini bakal memicu aksi perpecahan Uni Eropa yang lebih besar lagi… dsb.  Dan karena ketidakpastian itu berarti koreksi.. saya gak mau pusing kepala dulu.  Mendingan kita lihat Senin deh.  Kalau DJI tar malem ternyata koreksinya kurang dari 2 persen.. lha itu berarti kita bisa rebound di hari Senin.  Tapi.. Kalau DJI koreksinya masih lebih dari 3 persen…. hehehe… berarti market minggu depan bakal seperti roller coaster.

Saya mau lihat minggu depan saja deh.

Happy trading… semoga barokah!!!

Satrio Utomo

*disclaimer ON

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David Cameron resigns after UK votes to leave European Union

Photo by The Guardian

JAKARTA (TheInsiderStories) – David Cameron has resigned as prime minister after the British public rejected his personal entreaties and voted to leave the European Union, The Guardian reported.

“The will of the British people is an instruction that must be delivered,” the prime minister said, his voice breaking with emotion, and his wife, Samantha, standing beside him in Downing Street on Friday morning.

Cameron promised to remain in post until the autumn, to “steady the ship”, but said: “I do not think it would be right for me to be the captain who steers the country to its next destination.”

He said he had already spoken to the Queen to make his plans clear; but would not yet trigger article 50, the clause in the Lisbon treaty that kicks off the two-year process of withdrawal from the EU.

His dramatic announcement came after a sharp fall in the pound and as £128bn was wiped off the FTSE 100.

Cameron said: “I am honoured to have been prime minister of this country for six years.”

Earlier on Friday, Nigel Farage, the Ukip leader, became the first party leader to call for Cameron to go, saying Britain needed a “Brexit prime minister”.

Cameron’s team in Downing Street were shocked and distraught by the narrow win for leave, with 52% of the vote, after polls had suggested a move towards a comfortable margin for remain in the final few days of campaigning.

The prime minister and the chancellor, George Osborne, had gambled their political futures on the historic referendum, which was called to settle the deep divide within their own party.

But a narrow victory for remain early in the night for Newcastle, which had been expected to reject Brexit by a stronger margin, set the pattern for later results, which saw people voting against the overwhelming advice of economic experts that leaving would be an act of “economic self-harm”.

In the Labour stronghold of Sunderland, leave led with more than 61% of the vote. Nuneaton, the UK’s bellwether area, went 66% for leave.

The value of sterling slumped to a 31-year low on currency markets, and was on course for its biggest one-day loss in history, as it became increasingly clear that voters had rejected the overwhelming consensus at Westminster.

Treasury officials were preparing to implement contingency plans for calming financial markets that were prepared in the run-up to the poll, and the governor of the Bank of England, Mark Carney, was expected to make a statement on Friday morning.

Both the BBC and ITV called the result for leave at around 4.40am. Farage had declared victory 20 minutes earlier, despite having earlier conceded he had probably lost. He said the British people had achieved a revolution “without a single bullet being fired”.

Farage also criticised the claim at the centre of the cross-party Vote Leave campaign that leaving the EU would free up £350m a week to be spent on the NHS.

“This, if the predictions now are right, this will be a victory for real people, a victory for ordinary people, a victory for decent people,” he said.

Farage had been criticised for what some saw as the divisive tone of Leave.EU’s campaign, including a controversial poster picturing a queue of migrants, with the heading, “Breaking Point”.

Cameron had planned, on the basis of a remain win, to announce a series of policy initiatives immediately, to reunify his fractured party and relaunch the government.

Gisela Stuart, the Labour MP who backed the Vote Leave campaign, gave part of her victory speech in German, saying Britain would remain an open and friendly country.

“People were given the impression they had no choice but to remain, but they voted to leave. It is incumbent on all of us to be very calm and remember our responsibility for the future of the United Kingdom,” she said.

The shadow chancellor, John McDonnell, said: “People will be waking up this morning to turmoil in the markets and the pound crashing, and fearing the emergency budget the chancellor threatened to hike their taxes and cut public services.”

The Labour leader, Jeremy Corbyn, had earlier called for the prime minster to trigger article 50 immediately. “The whole point of the referendum was that the public would be asked their opinion, they’ve given that opinion and it’s up to parliament to act on that opinion.”

 

The post David Cameron resigns after UK votes to leave European Union appeared first on The Insider Stories.

Source: The Insiderstories
David Cameron resigns after UK votes to leave European Union

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