Economy: Investor confidence recovers after BI's rate hike - Mandiri Sekuritas

Market review
§ Foreign confidence improved as BI hiked interest rate to curb inflation. The rupiah has been strengthening around 1% to Rp8,930/US$ since the rate hike decision last Friday and foreign inflows continued into the bond market.
§ Yet, the JCI slipped 1.8% to 3,417 in the past 7 days. Better-than-expected US economy data and heightened political tension in the Middle Eastern countries prompted investors to temporarily reallocate some of their investment to safe-haven assets.

Global economic update
§ Recent developments in the US economy support the country’s momentum to rise after being hit by the financial crisis. In 2010, the economy grew 2.9%, consumer spending was the highest in years, and more people had gained jobs. The desired pace of recovery, however, is not yet achieved
§ The latest inflation figure indicated that inflation is continuing to build up in emerging Asia, raising expectations for further policy tightening

Domestic economic update
§ Indonesia’s GDP grew by 6.9% yoy in 4Q10, beating consensus estimate of 6.3% growth. For the full 2010, Indonesia’s GDP grew by 6.1%, as the country rode on global economic recovery.
§ Inflation remained high at 7.02% yoy in Jan11, driven by food price inflation. The central bank responded by hiking the benchmark rate by 25bps to 6.75%, yet we expect another 25-bp rate hike for this year in 2Q11.
§ BOP surplus rose 185% to US$11.3bn in 4Q10, backed by increase in commodity prices and improved capital account structure.