• Indonesia’s economic fundamentals are not as weak as they seem
• We still project the BI rate at 8.00% by end-2014, but adjust the timing of the next rate hikes to Q2 and Q3
• A further rally in IDR bonds will be tactical and limited; we maintai...
• Our Indonesian clients are slightly more optimistic this year on business prospects
• Our survey results suggest that sustaining revenue growth remains the key challenge
• Indonesian clients are bearish on their local currency vs. USD in 2014,...
• We expect Indonesia’s economic fundamentals to improve in 2014
• We lower our end-2014 BI rate forecast to 8.00% from 8.25%
• Trade balance is set to improve, driven more by import slowdown than by exports recovery
Parliament passed a non-expansionary budget for 2014, with a deficit target of 1.7% of nominal GDP
• We maintain our forecast of a deficit of 1.5% of nominal GDP
• Net supply target is IDR 205tn, or 12% lower than in 2013; stay Overweight duration...
• BI to focus more on stability, less on growth, even in election year 2014
• BI is likely to continue to tighten monetary policy, despite slowing inflation
• We estimate the new optimum real GDP growth rate at 5.5-6.0% in 2013 and 2014...
• Although Indonesia’s economic fundamentals are still strong, its external exposures are rising
• Balance-of-payments deterioration needs to be addressed with structural rather than ad-hoc measures
• External debt has risen in recent years, but ...
• Indonesia’s economic fundamentals are deteriorating; the market perceives that country risk is rising
• We revise our BoP, GDP growth and government budget deficit forecasts
• We expect the IDR and IDR bonds to weaken further on inflation risks...
We believe BI Governor-Appointee Martowardojo is more likely to hike rates
• We project inflation to reach 5.5% y/y by end-2013, still within BI’s target range for this year
• We expect the current account to remain in deficit in 2013...
We believe that the government is unlikely to hike subsidised fuel prices in 2013
• We now expect BI to raise the FASBI rate, instead of the BI rate, by 50bps in H2-2013
• Stay Underweight FX and Neutral duration on IDR bonds; shift 5Y and 20Y hol...
• Sentiment in Malaysia is more bullish for 2013 vs. 2012; optimism has declined in Indonesia
• Domestic and regional issues are back in focus, especially wage costs and political uncertainty
• Clients are more optimistic on the THB in 2013 than i...
• We expect the C/A deficit to shrink to USD 8bn in 2013 from USD 21.5bn in 2012 on higher exports
• We lower our short-term FX weighting on the IDR to Underweight; maintain medium-term Overweight
• Stay Neutral duration and shift to Underweight ...
Mild domestic inflation and QE3 to limit further hikes in FASBI rate to 25bps by end-2012
• Basic electricity tariffs are likely to be hiked by 15% next year, but we expect a limited impact on inflation
• We expect IDR to underperform within A...
• We cut our 2012 current account forecast to a USD 16bn deficit (1.8% of GDP) from a USD 2bn surplus
• We expect Bank Indonesia to raise the FASBI rate by another 75bps in H2-2012 to slow credit growth
• Maintain a Neutral cash and duration sta...
• BI has sufficient FX reserves to manage worst-case capital outflows estimated at USD 10-20bn
• Topside risks to USD-IDR have diminished, given shift in FX policy, monetary tightening
• Short-term FX rating on IDR raised to Neutral from Underweig...
This supersedes the version dated 14 June 2012. Amends price forecasts in Figures 35 and 36.
• Coal price downtrend will start in 2013, in our view, underpinned by a supply glut
• This view is in stark contrast to our previous bullish view on coa...
A 33% hike in subsidised fuel prices is still likely, possibly in H2-2012
• We revise our 2012 GDP growth forecast to 6.0% from 5.8%, while maintaining our 2013 forecast of 6.5%
• We maintain a Neutral duration stance on IDR bonds as inflation wor...
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The world economy is in transition. Global growth rates are picking up, but transition means elevated risks and volatility.
In terms of global implications, all eyes will be on the US and China, with the US normalising monetary policy and China rebalancing its economy.
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