the inflation effect toward industry in developing country, namely Indonesia

the inflation effect toward industry in developing country, namely Indonesia

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First, I would like to apologize for being absence for couple months from my routine in writing about finance review. However in next couple days, we will review about the influence of some macro parameter toward industrial index in developing countries. In this discussion, we will talk about how the condition in Indonesia, one of the fastest growing economic countries in south east asia.
The basic of analysis will be based on the concept of Capital Asset Pricing Model or more familiar being known as the CAPM concept. This model put the movement of agrregate index as the beta of the market. Here we try to replace the beta market with the inflation and see how is it look like toward index of industry in Indonesia.

One of the more develop and focus here is, we also attach the date of the announcement from the rise of domestic oil price. Many economist belief that the rise of oil price trigger the inflation to be wilder. Therefore we will see how this judgment occur in the real laboratory.

From the graph above we could see that inflation really affect the index mostly on crisis 2008. Before the occasion index of the industry and inflation did not really affect each other. 

From the rolling adj R square, its obviously seen that in Feb 2008 and Feb 2012, is the moment where most of the index was affected by the inflation. These analysis become interesting since at that time there was huge world crisis in the world. So somehow Indonesia also give some respond toward it.

For further and deep analysis of this phenomenon, you can contact me directly toward email in dimasmukhlas@yahoo.com!

cheers!

The merger background of SCTV and Indosiar

In most recent days we hear that two big television firms who just deal and did merger in Indonesia, there are Indosiar and SCTV. Eventhough both of this company never be listed in LQ 45 (most liquid stocks in Indonesian market) but the merger still going on. It seems that there are no dubious words between this process that actually they are try to gain more in size. It is due to the competition in Broadcast industry that getting higher and steeper.

In today review, I want to see hows the movement of Indosiar stock strength, the reason is to see if the merger is actually will benefit for them or not in fianncial market condition.

Figure 1.
The comparison of adjusted close price between index (IHSG) and the price of SCMA (SCTV)  and IMDK (Indosiar).

 Figure 2. The compounded continues return of Indosiar and SCTV, and also IHSG.

 Figure 3 Rolling 24 months beta of Indosiar

 Figure 4 Rolling 24 months of SCMA beta

Figure 5 Regression of IDKM and IHSG

Figure 6 Regression of SCMA and IHSG


From the graphics above, we can see some hidden information related to this merger.
First, when the date approach the merger announcement, the price of both stocks is rising, it seems that investor or any market player can catch the hidden news from this moment.
Second, the continuously return of the stock after 2012 rise stunningly, leaving the aggregate continuously return of whole stock, the biggest owner of the stock will gain huge profit if they release their stock on proper moment. It is due to the stock of both firms is not sold anymore when they announce the date of merger.
Third, the allegation that the two firms will merge can be seen at the second quarter of 2010, the stock started to be more sensitive toward market, the rise of beta which higher than the average of 5 years average beta indicate that the owner of both stocks started to use this momentum to bid their luck.
Fourth, the regression line show that however both of this stock is still categorized as high risk stock, therefore market should be aware and not put this stock as long term investment.

To sum up, the graphs above is supposed to show the psychological movement of stock player in facing the issue of firms merger. The rise of stock sensitivity toward market and also the rise price show that any signal which is issued from credible or incredible resource has affected the psychological of market.