JAKARTA. This week, the rupiah exchange rate against the US dollar (US) is likely to strengthen. Yesterday, the spot rate of rupiah closed at Rp13,345 per US dollar. Earlier, on Friday (11/11), the spot rate of rupiah had dropped to Rp13,383 per US dollar.

But, the potential weakening of the rupiah remains exist. There is still a bullish sentiment US interest rates could depress the rupiah. Yesterday, the rupiah exchange rate in the market of one month non-deliverable forward remained stay at Rp13,555 per US dollar.

The decline in the rupiah exchange rate could bring negative impacts to the number of issuers. Generally, those issuers were called USD looser. Analysts at Association of Indonesian Securities (Asosiasi Analis Efek Indonesia) Reza Priyambada said that the issuers, which rely on imported raw materials will be hit the hardest.

Understandably, the issuers have obligations in the form of the US dollar. This could potentially lead to foreign exchange losses, which could depress the company's bottom line. "The USD looser issuers usually come from the consumer sector, pharmaceutical, chemical and property (sectors)," said Reza, Tuesday (15/4).

Setting the cash position

Similarly, Head of Research at Bahana Securities Harry Su said that the most affected sector is pharmaceuticals.

In referring to the financial statements of PT Kimia Farma Tbk (KAEF), 70% of the company's cost of were in the form of the US dollar. In the third quarter of 2016, the cost of the state owned enterprise amounted to Rp2.71 trillion.

Issuers that have a number of US dollar-denominated debts can also be hit. For an example, PT Lippo Karawaci Tbk (LPKR). Harry estimated that if the rupiah falls by 1%, the net profit of LPKR will be eroded by around 12%.

PT Mitra Adiperkasa Tbk (MAPI) has a similar story. If the rupiah declined by 1%, the net profit of the owner of Starbucks’ license can drop by 10%. "Overall, every 1% of weakening rupiah will depress the earnings per share (EPS) on average at 0.9%," Harry wrote in his research.

To get around losses, Reza suggested that the issuers can adjust the position of the cash in the form of the US dollar and rupiah. This is partly done by PT Kalbe Farma Tbk (KLBF). Reza assessed that the pharmaceutical companies' cash arrangement is appropriate. KLBF has the availability of cash in the two currencies. Therefore, to date the company does not use hedging scheme.

But there are also issuers who actually benefit from the weakening rupiah, such as commodity-related issuers. According to Harry, there are five issuers, which have attractive stocks while the rupiah eroded, such as PT Salim Ivomas Pratama Tbk (SIMP), Wintermar Offshore Marine Tbk (WINS), Tunas Baru Lampung Tbk (TBLA), PT Bukit Asam (PTBA) and PT Sampoerna Agro Tbk (SGRO).

Unfortunately, the commodity sector is still facing problem related to low demand. "Sometimes the sentiment neutralizes the positive sentiment in the commodities sector," said Reza. (MUHAMMAD FARID/Translator)

Editor: Yudho Winarto