Investment opportunities in Central Fuel Price Increase

President Susilo Bambang Yudhoyono in the middle of last month hinted about the rising price of fuel oil (BBM) is planned to be implemented as of 1 April 2012. The planned increase in the amount of fuel is starting from Rp 500 to Rp 1,500 per liter, or about 10 percent to 30 gratuity per liter.
The increase in fuel prices is expected to be carried out simultaneously with the increase in electricity tariff (TDL). In general, an increase in both factors of production can not be avoided consistent with the possibility of rising world oil prices due to geopolitical conditions in Iran. In addition, high oil demand in the winter in the northern hemisphere led to suppression of the state budget for an increase in the value of the fuel subsidy to be paid.
In principle, the increase in the input items can not be avoided again by the government. That must be anticipated is the impact on the economy as a whole gains, especially on rising inflation. Actually, the rise in inflation rate from rising above two things are a logical consequence that must be accepted by the government. And it seems the government is fully aware of it. But it was the concerns arising from Bank Indonesia policy that has lowered the benchmark interest rate to the lowest point (5.75 percent) since the BI rate is used as the benchmark rate. Although the background of this reduction is to provide a stimulus to spur growth in real sector financing, but in this way can be counter productive when on the other hand the government should raise fuel prices and electricity.
Investment opportunities
In the short term, increase the rate of inflation can not be avoided, although in the long run will definitely occur again in line with the normalization of economic growth supported by domestic consumption demand for Indonesia. The question then is whether the rise in the inflation rate has a negative impact on investment instruments in the stock market?
In the short term, the answer is correct. Negative sentiment is certainly going to affect the price movements of financial assets, whether in stocks or bonds. In theory, the rise in inflation that has contributed to the decline in real income levels both in the company as the issuer and the investor as a buyer of stocks or bonds of the company.
But if the government has done with the anticipation of providing compensation for the removal of fuel subsidies in other forms to people, even the rise in fuel prices will have a positive impact in the long term through economic growth that will give the effect of normalization on the level of inflation. Because rather than providing subsidies to the owners of motor vehicles, especially four-wheel vehicle owners who incidentally has a higher purchasing power, it will be more beneficial to the economy in general if the subsidies for fuel and electricity tariffs on infrastructure development which will ultimately benefit the the wider community.
Therefore, the correction that occurred in the stock and bond markets should not be viewed as something that is worrying for investors and holders of capital. Decline in prices should be viewed as an investment opportunity in order to reduce the average acquisition cost (average cost) on the portfolio held by investors. Moreover, many of the analysts have calculated that the stock and bond markets Indonesia currently is not spelled out cheaper. Although several other analysts said that the Indonesian stock market valuations and the level of bond yields are now in the position of fair value, so the relative position of valuation is the same as stock and bond markets at the regional and international levels.
Advice for investors
So the advice to investors is to use price reduction as an opportunity to buy some stocks or bonds are still considered to have attractive investment prospects in the medium and long term, belongs to the Equity Fund and Balanced Fund currently has cash / cash relatively large. This means that the cash / cash, the Fund has the ability to lower the average purchase price of the market correction is due. This in turn will provide benefits to its investors in order to obtain the optimal rate of return.
Strength of domestic consumption and export value amount of the relatively low contribution to GDP growth in Indonesia as a whole can be viewed as a basic support Indonesia's economic strength of the shocks the economy problems that occurred either in Europe or the United States.
Indonesia's rating to rise into the category of Investment Grade (BBB-) as well as deregulation in the field of investment and land acquisition for public infrastructure services are expected to be the basic ingredients of Indonesia's economic growth driver within the foreseeable future.
Valuations relative prices already are at fair prices shows that Indonesia's financial markets have been in the same position relative to other countries both in Asia and the ASEAN region as a whole and even global. Therefore, the correction is no longer seen as a threat anymore, but rather an opportunity, especially for investors who currently have funds in cash in value relative good enough to be reinvested into the stock and bond markets, or at least in the form of Mutual Funds - Mutual Fund currently has enough cash position to buy back some shares still have a high potential in the long run.