ARE WE GOING UNDER?

I'm never an optimistic person. Some would say that it's a bad trait in a person, but I'd rather call it as "self-hedging mechanism". In my spare time I'm doing my job as a stock trader and well, sometimes as personal robo-trader. I've always been giving my negative outlooks toward the IDX and the portfolios.

In this year I remain bearish on IDX. One thick cloud hanging over the sky is the over-the-estimate December 2010 inflation rate. The number hit 0.92 per cent in a month. On a year basis, it went to almost 200 per cent raise y.o.y. Yet Bank Indonesia (Indonesian Central Bank) is resistant to higher BI rate, thus the anchor rate remains 6,5 per cent. The reason why BI kept the BI rate unchanged was because if it raises the interest rate, the banking sector will get hurt. Plus, the inflation is cost-push inflation, thus there's no need to raise the anchor rate since it wont work.

Yesterday second trading session seemed like on a good pace to keep up with the regional Index since BI announced that it hold BI rate at 6,5 per cent. Led by the banking sector, index seemed to enjoy being in the green area. Everyone remained optimistic, my fellow robo-trader bbmed me the big fat smile emoticon and it's kind of ridiculous I might say.

And the judgement day is today. After the week of joy with the Index, it shows its own fragility. The new support level, around 3725, built in 2 months was battered down in a day to slightly above 3600.

Led by the fall of global commodity prices yesterday, and followed by Asian stock index, IDX is beaten to ground today. It fell 104 points, correcting all the gains during December 2010. And yet, people still cast clear optimistic views on the entire economy.

Well, listen up. I'll make it this way, soaring prices reduce real interest rate, hence reduce income in real term. And it doesn't end just like that, interest rate in emerging economies is still relatively higher than developed economies which will drag all the money to every emerging economy. Those money, tho, will only get a grab on "liquid asset", those are capital market. The long-term project investments remain untouched. This, all of you know where it is going, in time will create nothing but bubble in the economy (hot money, in well-known term). Today is the solid evidence that our IDX is still highly dependable on foreign risk appetite, if they say no go then no go. Over 1 trillion Rupiah net sell at our stocks market today.

And it's for the wrap-up of the saddening tale today, the wild inflation rate without any leash is like walking a wild stallion in the evening, you will have no idea where it's going in no time. It will severely hurt our trade balance, investment and definitely our consumption, and who says we can accelerate in 6-6,5 per cent speed a year, I'm not on your side.