Factors or Indicators that will affect the economic condition of the country

After doing the analysis I found 4 factors or indicators that affect the economic condition of the economy, these are:

1. GDP: Y = C + I + G + (X – M)

        GDP (Gross Domestic Product) is the total market value of all final goods produced  in a country and und usually in a year. but in Indonesia it is counted quarterly. GDP is used to measure the economic growth of the country or we can say that growth of GDP also can reflect the health of the economy in a country. .  If the GDP growth is negative or declines for two or more consecutive quarters or even more than a year, the investors will see that as a bad sign for them to invest their money  because they may assume the country is experiencing the recession or even depression which means that the country in crisis. if they consider the country condition is not healthy for their investment and will not generate good profit they may withdraw their money from Indonesia to avoid the risks of getting lose which means that  Indonesia will experience the lack of capital, then make the economic developmnent is also getting slower.

2. Inflation

  Inflation is the general increasing price of goods and services in an economy of a country. It is usually caused by the increasing in the supply of money. The inflation makes the value of rupiah falls because as the cost of goods and services are going upward people can no longer be able to purchase as much with that money as they could, before the inflation.

This bad for the coountry because of some reasons, such as:

• As the value of money decreases, then it will make the purchasing power decreases and decrease the welfare.
• Increase the poverty
• Increase Unemployment and increase the crime
• Reduce the real interest rate;

r = i – P in which r = real interest rate, i = nominal interest rate , and P = inflation

• Bank saving decreases
• Reduce investment
• Reduce economic growth

 3. Investment

Generally the idea of investment is putting money to use be used in such way with an expectation to generate more money from that investment.

The development of investment are affected by some aspects such as; interest rate because the higher the interest rate will attract the investors to invest; Regulations, wether the regulations can encourage the investment or not; the economic growth of the country, because it reflects wether the condition of the economy is possible to gain the good profit or not or may be the country is in crisis; the security of the country because the security can let the business to develop; human resource, wether the country posses good human resource to develop the business or not, etc.

It can affect the economic condition because the decreasing on investment of course will also decline the capital in which can hamper the development of the business in Indonesia.

This condition could be  even more dangerous, because Indonesia adopts the free foreign exchange system, so if the private thinks that the economic condition is undesirable so they can transfer their money to overseas.  Furthermore, if the reducing of foreign exchange also can reduce the economic welfare, because it has some functions, such as:

-                      Buy import products from overseas

-                      Pay the foreign debt and also the interest

-                      To fund the international trade

-                      As a source of State income, etc.

 

4. Exchange Rate

   Generally exchange rate can be meant as the value of a certain country’s currency compared to another currency, for example Rupiah against US$ or Singapore $ against US$, etc. There two types of exchange rate, the first is fixed exchange rate. It is the rate which have been set by the government and maintained as the official exchange rate. Then, the second is floating exchange rate. It is determined by the private market through supply and demand of the currency.

Theoritically, if Rupiah is depressed against US$, so it will disadvantage the the importer, because they will pay with higher price but it will  advantage the exportir because our exported products can be sold in a cheaper price in the exported countries in which means that trade has possibility to grow in which also can  positively impact the many business owners in the country. On the other hand, if the export is getting slower it will negatively impact the business owners which can reduce the taxes and furthermore will reduce the Government budget.

Then the declining on the Government budget, can hamper the economic development of the country, because the government budget is used to perform its functions such as alocation function (the budget is used to decrease the unemployment, to build the infrastructure,etc.); stability function (as the instrument to attempt and maintain the fundamental stability of economics and prevent the deficit); distribution function (budget is used for public interest, and is distributed evenly and fairly to the people through subsidies; in petroleum, education, etc.).

Sentimen Eropa Dorong IHSG Dibuka Naik 0,03%

INILAH.COM, Jakarta – Pada perdagangan Senin (5/12) ini IHSG dibuka naik 0,03% ke level 3.781,26.

Namun Samuel Sekuritas memperkirakan IHSG hari ini masih akan bergerak sideways dengan kecenderungan melemah seiring potensi profit taking setelah indeks menguat sekitar 4% selama pekan kemarin. Support indeks berada di level 3.765.

Bursa AS kembali ditutup mixed meski sempat dibuka menguat di awal perdagangan setelah rilis data payroll AS yang lebih baik dari ekspektasi. Data pengangguran AS di bulan November secara mengejutkan turun signifikan menjadi 8,6%, terendah sejak April 2009. Harga komoditas dunia masih cenderung bergerak menguat dengan harga minyak tetap bertahan di level US$100,9/barel di akhir pekan kemarin sementara harga Nikel melonjak 5,9% ke level US$17.740/ton.

Bursa Asia mengawali pekan ini dengan dibuka menguat tipis memfaktorkan sentimen positif dari rilis data pengangguran AS yang lebih baik dari ekspektasi. Pasar diperkirakan masih akan menantikan berita dari Uni Eropa terkait penyelesaian krisis utang di pekan ini. Sementara harga minyak dunia pagi ini kembali menguat dan mencapai level US$101,2/barel.

Sebanyak 38 saham tercatat naik pagi ini, sedang 46 saham turun, dan 78 saham masih stagnan. Indeks LQ45 dibuka naik 0,05% ke level 669,86, sedang JII naik 0,11% ke level 528,78.

Volume perdagangan pagi ini sebanyak 111,68 juta saham dengan nilai transaksi sebesar Rp83,18 miliar. Namun, asing pagi ini lebih banyak melakukan penjualan dengan mencatatkan net foreign sell sebesar Rp2,93 miliar.

Saham-saham yang naik tajam pagi ini adalah AALI yang naik 1,79%, ITMG naik 0,62%, UNTR naik 0,39%, SMGR naik 0,53%, TLKM naik 0,68%, dan ICBP naik 0,99%.

Indo Electric

Company Profile

Indo Electric is located in JL. Kyai Mojo No. 20, Yogyakarta. This is a sole proprietorship business which sells any kind of electric equipment and also some electronic good as compliment. The owner is a woman named Mrs. FrenciaSusianti. She started her business in February 23^rd 2003.  When starting her business the owner spent about 300 million rupiahs to open the business and about 50 million rupiahs (4 years renting) to rent the shop, that amount came from her personal money. To assist her in serving the buyers, she hired 3 people from the beginning of the business until now.

In the first year of her business, many people still did not know about her shop which then impacted to the least sells of her products. Thus, shedecided to market it through local mass media, in order to introduce her shop to public and also to get people’s attention. But she said that, it was not the promotion which gave big impact to her business. The one that really helped was mouth to mouth marketing which was done by her customers at that time. Then, in the second year many people were starting to know about her shop and now she has had many loyal customers which often buyelectric stuffs in her shop.

Some Products Sold in Indo Electric

Lamps	Switch handler
Cable	Antenna
Fan	Downlight
Iron	Electrical bell
Paralon	Cable duct
Switch	Fitting lamp
Ballast	MCB (miniature circuit breaker)
Balk for lamps	Power supply and terminal block
	Industry panel and temperature control

 

Identification and Analysis of the Risks

1. Market risk

Market risk is the risk that prices will move in a way that has negative consequences. In the condition when the prices of the raw materials increase, the producers and suppliers also will increase the price. But for the retailers who face the final customers directly, it will not be easier to just increase the price.  A little amount in profit also will be withdrawn to adjust with the new higher price from the suppliers which then can negatively impact the business.

2. Credit Risk

Credit risk is said to be the risk in which the customer, counterparty, or supplier will fail to meet its obligation. Sometimes some customers make a payment exceed the period of the payment due that given by her and some customers seldom don’t even pay the debt at all which of course incur losses to the business.

3. Business Risk

This risk is about the likelihood that the future operating result will not meet the expectations. As the business sells durable goods, the customers’ purchases will not be repeated in a short period and the owner also cannot know when will the buyers need or want to buy the goods again, because sometimes the reliability of each product is different. This condition makes business risk is likely to happen.

4. Hazard risk

It can be caused by human error for example they accidentally drop the goods or they might kept it in an inappropriate manner. It can also come from the physical condition of the store.

5. Financial Risk

There is no separation between personal assets and debts with the assets and debts in business. So when there is loss or even bankruptcy, personal assets of the owner will be negatively impacted for example the personal assets can be seized to pay the debts. Then, in the condition,when the owner use big amount of her money for personal use, it can also cause the limitation of the capital of the business

Sources of Risks

From those risks I found some of the risk sources, such as:

Market; Economic environment; Human error; Financial;

 

How the Company Manage the Risk

1. buy the products in big quantities for the products which have high demand

2. allocates part of its profit to cover the losses which often caused by the debts that are not paid by the customers and also to cover the losses that caused by the sales return.

3. chose to use her relatives as the suppliers in order to make it easier to negotiate in price, payment

4. made record all of all the cash inflow and out flow of the business, although it is only a simple record.

 

Conclusion

My conclusion is, any kind of business must have risks in operating its business, although it is just a small business, maybe the differences are the number of risks (the bigger the company the broader the scope of the risks)and also in small business the owner does not put big concern and effort in dealing with those risks while in big companies, the risks are made as a part of every employee’s thinking and job responsibility.

Indo Electric as small business also faces some risks in operating its business; market risks, credit risks, business risks, and hazard risks. But the owner does not analyze further about it. She just found out the risk through everyday business operation. Although she does not make further analysis about that, but she still takes some actions to deal with the current risks. In my opinion, actually risk is a part of every human’s life not only in business but also in other life aspects. So dealing and managing with those risks are something we must face almost in every action we take.

Analysis of GJTL Stocks and Business Portfolio

Company Profile 

Gajah Tunggal was established in 1951 by Syamsul Nursalim. While the most recent president director of the company is Chan Shiew Choong, who has joined with the company since 1991 and appointed to become president director in 2004. In the beginning it produces the bycicle tires and inner tubes. Then, in 1971 Gajah Tunggal was starting to make some varieties in products by producig motorcycle tires,  followed by bias tires for passanger and commercial vehicles in 1981, and the latest was in the early 90’s the company started to produce radial tires for passanger cars and light truck. Now, It has been the largest integrated manufacturer of tires and inner tubes for motor cycle, passanger cars, commercial and heavy equipment vehicles in South East Asia.

Analysis of the Company Stock Risk and Market Risk

Beta is the sensitivity of the stock return relative to the return of the market portfolio. It is used to measure the stock’s volatility in relation to the market movement. From the output of the regression the value of beta is 1,38870 which means that the increasing of 1 % of market return will increase the stock return by 1,338870%.  From the regression output the beta of the stock is 1,38870 < 1 which means the company stocks have high volitality, then also higher risks. . Therefore, This stock is suitable for the people who are daring to take risk by investing their money and willing to get higher return.

Standard Deviation and Average Analysis

Standard deviation in the statistical term which is used to measure the variability or dispersion around an average. JKSE’s average market return value is 0,000961% and the standard deviation rate is 0,013926%. It means the returns range are more likely between 0,000961% ± 0,013926%. The company has possibility wether face loss at –(0,000961% -0,013926%) or generate profit at (0,000961% + 0,013926%). While the average value of Gajah tunggal stock return calculated from January 2nd 2010 to Oct. 31st 2011 is 0,004775% and the standard deviation is 0,036696%. The value of the standard deviation shows us that most of rate value distribution is 0,036696 higher or lower than average value. As the value of average rate is positive, it means that in average  the investment still gives positive return compared to the previous date, although some dates shows the decreasing in the stock return.

If we compare the value of  the average market return with average stock return of Gajah Tunggal, we can see that the company stock generates higher return than the market, whereas if we see the value of the standard deviation both from company and market return, the standard deviation of the company is higher than the market, which means that the company stock has higher risk than the market but generates higher average return. Thus we can conclude that Gajah Tunggal stock is proper for the investors who are daring to take higher risk to get higher return.

If compare the market return with the company return above we can see that the company stock returns are more fluctuative than the market return, which can be meant, that stock returns of the company are more volatile than the market return, thus it burdens higher risk to the investors.

Factors influence the fluctuation of stock return and market return

GJTL lowest price is 430 at  7^th  January  2010: GJTL dropped to the lowest point in the early first quarter of 2010.

GJTL highest price is 3450 at 28^th July 2011: While, when IHSG also dropped on July 28th 2011 because of profit taking of the investors to the preeminent stock that gained high profit in previous day, in this case 81 shares weakened, 73 shares stagnant while 45 shares were rising and GJTL was of them.

JKSE’s highest price is 4193,44 at 1^st August 2011: market index reached the highest price on  that day because there was also an increasing in Europe stock exchange, as the stock exchange market is still steered by the Europe.

JKSE’s lowest price is 2475.57 at 8^thfebruary 2010: the trading of the market index still suppressed and declining as many as 43,4 points (1,72%), that was caused by the Europe crisis. The thread of failing to meet obligation of some countries in Europe, such as Greece, Portugal, and Spain caused many investors not willing to invest their money because, people were afraid the crisis would continue to next level.

Analysis of Company Portfolio Using BCG Matrix

Question Marks: 1. Radial business segment is in the question mark position, according to BCG Matrix. If we see it from the market growth, the products of radial tires keeps increasing significantly, although it only has low market share both in local and global market. Moreover, if we see from the growth of cars selling in Indonesia which increase year by year it will be better for the company to prioritize this business segment, especially in the domestic market, because there is a big opportunity to be star, as the cars selling keeps increasing. to reach that the company can do market penetration, market development, product development, etc.

2. the second is Tire Cord and Synthetic Rubber segment in the question mark because if we see from the market growth, the demand of the products, especially synthetic rubber increased significantly that 41 % from the previous year, while for the market share it still posses the low level of market share, I think it is because this division is still new if we compared to other divisions in the company. In my opinion company should maintain this business segment  instead divest it, because as we know the cars and the motorcycle sells increase year by year in Indonesia, it will also increase the demand of the tires, in which furthermore will also increase the needs of the raw material of the tires. Beside that this division can also stress the cost of tire production by providing the raw materials by itself.

Cash Cows: Bias Tire segment is in cash cows position because if we look the its market share, it is the leader of the products in market which means it has the highes market share in the market, but if we look to its market growth, this business segemen has experienced low growth which can be seen in the chart and also proved by company’s action in which it did not plan to increase the capacity of the production in this segment. In this condition, I think the company should be extracting the profits, and invest as little as possible in this business segment.

Star: Motor Cycle Tire business segment is in the position of star, in which have high growths and high market share as the motorcycle selling keeps increasing year by year in Indonesia and it still become the market leader in motor cycle tire segment until now. The strategic options for the company in this position are market penetration, market development, product development or joint ventures.

Conclusion

If we see from the market return in which has positive value and is higher than the market return, we can assume than Gajah Tunggal performs really well. The higher market return shows that the Company stocks grow more rapidly than the market index, we can see from the chart of Company stock price in which describes that the growth of the company stock increase significantly from below 500 hundred until almost reached 3500 per share or about 7 times higher in less than 2 years compared with the market index that begins with 2475 untill 4,193 or it is only 1.7 times higher in less than 2 years. That fact, shows that the company has good prospect for investment.

The rapid growth of the stock price also reflects, the good business condition of the company in which all the business segment shows positive improvements in total selling compared to the previous year. Then the rapid grwoth of the stock price reflects than the company has more source of money to expand their business and invest more in the business segments. But as the each business segment are showing different growth, different demands, etc. Company has to be careful in Investing their money, it should be better indentify which businesses has strong position and which are not, then make the decision wether to invest more in certain business segment, divest the business segment, etc.

But, although the stocks price keeps growing rapidly, the stock of the company is more fluctuative the the market index, in can bee seen from the stock return and market index chart, that shows that the movement of the stock returnn are more volatile than the market which reflects higher risk of the stocks. This condition also proven by the standard deviation value of the company which is higher than the market index, as the standard devuation measures the dispersion on the average it means that the higher standard deviation the higher the risk that also reveals the higher risk of the company. Although market return is lower and the stock is not growing so rapidly but we can see from the chart of Ri and Rm that the movements are more stable than the company stock.

My final conclusion is that Gajah Tunggal shows a very good performance in terms of business growth and i think it will still keep growing, if we look to the car and motorcycle market which are also growing rapidly. So the company has good prospect for the investment, but as the risk of the company stock is also higher, in my oipinion this stock is suitable for the Investors who are daring to take higher risk but get more money in return.

 

 

 

Hello world!

Reasons of Taking the Course

The reasons why I’m taking this course are because financial major is my preference than marketing and this course will be very useful for us in knowing how to manage the risks which exist inside or outside the organization, given nowadays economic condition which always change and full of risks