Indonesia

The Krakatau Report 30-Jun-2019
Top 3 Company Headlines
Toyota to invest US$2bn in developing electric vehicles in Indonesia (Business Times 27-Jun)
Pertamina (PTPP:IJ) expects to book $677m Q1 net profit (Jakarta Post 28-Jun)
Indonesia’s unicorn Bukalapak looks to expand into the Middle East (CNBC 27-Jun)
Top 3 Macro and Risk Headlines
Indonesia & India set $50bn trade target at G20 (Hindu Business Line 29-Jun)
More tax breaks planned to lift GDP growth (Business Times 22-Jun)
CB Chief sees room to cut interest rate (Bloomberg 17-Jun)
The Krakatau's View
Indonesia recorded a $207m trade surplus in May amid the escalation of tensions between the US and China. A commitment made at the G20 summit to strengthen bilateral trade with India could further boost exports. Jokowi’s govt has proposed tax breaks to spur the economy, particularly benefiting real estate investment. Widoko has also promised to support businesses through major infrastructure projects.
With the CB announcing possible interest rate cuts, the monetary policy might be easing in favour of fiscal stimulus through govt spending on infrastructure development.
Fun Fact: Indonesia considers relocating prisons to uninhabited islands (Jakarta Post 26-Jun)


The Krakatau Report 31-May-2019
Top 3 Company Headlines
SKK Migas, Inpex Corp agree on $20bn Masela gas block framework (Business Times 27-May)
CVC-backed PT Softex Indonesia could raise $500m IPO (Bloomberg 24-May)
Indonesian unicorn Bukalapak kickstarts global expansion (Business Times 20-May)
Top 3 Macro and Risk Headlines
Indonesia posts biggest monthly trade deficit on record  (Financial Times 15-May)
Jokowi’s government has a US$564bn plan to invest in infrastructure (Business Times 17-May)
Indonesia moves to manufacturing as commodities wither (Bloomberg 07-May)
The Krakatau's View
Indonesia’s economy grew at a slower rate than anticipated in Q1. Exports were hit by price volatility following the escalation of the US-China trade war. The trade deficit was also a result of falling commodity prices, particularly palm oil and coal. The govt’s plan to revive the export sector relies on attracting foreign investment in manufacturing and developing infrastructure. However, ambitious building projects will put additional pressure on the already fragile fiscal deficit.
Fun Fact: Indonesia is moving its capital from Jakarta due to flood risk (Washington Post 03-May)


The Krakatau Report 30-Apr-2019
Top 3 Company Headlines
Go-Jek becomes Indonesia’s first company valued at $10bn (Jakarta Post 05-Apr)
Govt seeks Volvo (VOLVB:SS), Renault (RNO:EN) investment in electric vehicles (Bloomberg 09-Apr)
Astra International (ASII:IJ) reports 5% growth Q1 (Business Times 25-Apr)
Top 3 Macro and Risk Headlines
Govt forecasts multibillion-dollar belt and road investments (SCMP 29-Apr)
Stocks and rupiah climb as Jokowi wins second term (Bloomberg 18-Apr)
Interest rates cuts could be underway in the light of Jokowi’s re-election ( Bloomberg 24-Apr)
The Krakatau's View
Following Widoko’s victory in presidential elections, markets have responded with a strong stock and currency jump. The Krakatau believes Jokowi’s record of stable growth and low inflation is likely to create favourable conditions for investment. Further commitment to pro-China policies could boost infrastructure development as a result of the Belt and Road Initiative.
A reduction in interest rates seems possible considering a stable currency and a renewed effort to boost economic growth after re-election. Easing of the monetary policy would make space for ambitious infrastructure projects.
Fun Fact: Komodo Island shuts because of Komodo dragon smuggling (Washington Post 02-Apr)


The Krakatau Report 31-Mar-2019
Top 3 Company Headlines
Garuda (GIAA:IJ) cancels 49-plane Boeing 737 order ( The Jakarta Post 22-Mar)
Nebras Power QSC considers selling its stake in PT Paiton Energy (Bloomberg 27-Mar)
Grab secures US$1.46b investment from SoftBank Vision Fund (Business Times 06-Mar
Top 3 Macro and Risk Headlines
Indonesian property stock soars 1,700% since January IPO (Business Times 11-Mar)
Australia and Indonesia Sign Free-Trade Deal (Bloomberg 04-Mar)
Indonesia threatens to quit Paris climate deal with EU over palm oil (Reuters 27-Mar)
The Krakatau's View
As presidential elections loom over Indonesia, Widoko’s populist agenda could slow down the economy, currently projected by the WB to grow at a 5.5% rate. Development of infrastructure and revival of manufacturing will pose the main challenges. A US-China trade war might help attract investment as textile and footwear companies plan to relocate supply chains abroad. A sharp rise in property stock prices raises the question of the sustainability of investment in the real estate market.
Growing environmental pressure from the EU could hurt palm oil exports. However, a new trade deal with Australia offers opportunities to boost exports in the car industry.
Fun Fact: Indonesia is opening its first underground train system in Jakarta (Bloomberg 24-Mar)