More reasons for fuel price hike

May 2013 inflation and April 2013 trade: More reasons for fuel price hike

Headline CPI was deflated by 0.03% mom or increased 5.47% yoy, lower than consensus and our estimates of 0.11% mom and 0.18% mom inflation, respectively. The decline was mainly driven by raw food and gold prices. Core inflation eased to 3.99% yoy in the same period, lower than our and consensus estimates. Decline in gold price has indeed helped to ease core inflation (contributed –0.1ppt to monthly inflation). However, Indonesia Market Summaries think not all is attributed to gold price and also believe mild core inflationary pressure partly reflected moderation in domestic demand.

The central bureau statistic also announced Apr13 trade data which showed a deeper deficit than our and consensus forecasts. Trade balance turned to deficit of US$1.6bn from a surplus of US$0.14bn in the previous month as exports contracted 2.2% mom while imports recorded otherwise, +9.6% mom. Exports were single-handedly pulled down by oil and gas contracting 18.4% mom. This result was not surprising as oil price and domestic production also went down in the corresponding period.

Meanwhile, imports performance rose on the back of higher domestic demand for non-oil and gas. Non-oil and gas imports accelerated 15.8% mom in Apr13 which was driven by growth in consumer goods (18.8% mom) and raw material (10.3% mom). Nevertheless, the tendency of the increase may have been inventory stocking ahead of fasting period rather than as a sign of economic acceleration as leading indicators still suggest economy in moderation pressure. This argument is justified as the monthly change of non-oil and gas imports which tend to peak two months before fasting period.

The recent data release provides stronger support for the government to increase subsidized fuel price.

1. Easing inflationary pressure will provide leeway of low inflation base that would lower the overall impact of inflation.
2. The sharp increase in trade deficit and, recently, under pressure rupiah, on the other side, show urgency to address fuel subsidy policy.

At this juncture, we maintain our view that inflation is likely to reach 8.2% in YE13 given the hike in subsidized fuel price. On monetary policy, in addition to intervening in bond and FX market, we also expect the central bank to eventually increase its interest rate, starting with the FASBI rate to support the currency. Thus, we see that FASBI and BI rate to increase to 5.0% and 6.25% respectively.

for Indonesia Market Summaries 4 June 2013

Indonesia Market Summaries 4 June 2013

DBS agrees to extend purchase deadline to 1 August 2013

DBS Group Holdings agrees to extend the deadline with Temasek for the purchase of 40% stake in Bank Danamon by 1 August 2013, two-months extension. This is the second time the acquisition deal deadline is extended. Comment: By regulation, DBS can only take up to 40% stake in Danamon and will have to wait for at least one and a half years before asking from the central bank to acquire more stake, providing they pass the GCG and financial condition/health status. We believe the group needs to wait for the MAS decision on reciprocal agreement between Singapore and Indonesia to open the banking industry to foreign banks, which will enable Indonesian state banks to open branches in the city-state country. Meanwhile the minority investment in Bank Danamon will lower DBS’ CAR under the Basel III accord.

Jababeka (KIJA IJ) partners with Plaza Indonesia (PLIN IJ) on mixed used development

Through its subsidiary, PT Grahabuana Cikarang, KIJA partners with PLIN in developing a mixed used for the mid-to-upper class costing approximately Rp4tn. The two companies will create JV companies PT Jababeka Plaza Indonesia (Ownership: 30% PLIN, 70% KIJA) and PT Plaza Indonesia Jababeka (Ownership: 70% PLIN, 30% KIJA) where the former will develop 4ha for residential and the latter develop 12ha for mall, hotel, and office. Funding will come from internal cash and bank loans. KIJA expects the project to take 6 years to complete since groundbreaking, which is expected to be next year. (Bisnis Indonesia)

Bakrie Toll Road sold for Rp140bn

ELTY managed to sell PT Bakrie Toll Road for Rp140bn to PT Karya Prima Investama on May 27. The proceeds will mostly be used to pay down debt. (Bisnis Indonesia)

Erajaya Swasembada revealed key dates on dividend payment

Erajaya Swasembada (ERAA) sets the cum and ex date for the dividend payment on June 25 and 26, while payment would be made on June 28. At the current price, its Rp60/share dividend payment (40% payout) gives a 1.8% yield.
for Indonesia Market summaries 4 June 2013