Market Flash: iSHARES MSCI Indonesia Investable Market Index Fund (EIDO:US) PRICE: 28.530 USD Down -0.360 (-1.246%) >>> BI: Rupiah Melemah Akibat Kondisi Eropa >>> Pertemuan FED pertimbangkan langkah baru dorong ekonomi >>> KIJA akan Terbitkan MEN Valas USD150 Juta >>> PT Indika Energy Perusahaan Teladan Dunia 2011 >>> Govt Promises Revision of Cost Recovery Regulation >>> BPMigas Demands PGN to Pay US$6 per MMBTU >>> Jababeka to Raise US$150 Million from Debt Markets >>> SCG Chemicals buys Chandra Asri >>> Solusi Tunas eyes Rp380 bio IPO >>> SMR Utama scouts Rp300 bio IPO >>> Alam Sutera picks two bond arrangers >>> ASII Tetap Rajai Penjualan Mobil Agustus 2011 >>> Perusahaan Thailand kuasai Saham TPIA senilai Rp 3,76 Triliun >>> Agis Main ke Tambang, Sahamnya Masuk Dalam Pengawasan >>> ACES Mendekati The Northern Agar Mau Kurangi Kepemilikan >>> IHSG masih harus berjuang terus bertahan diatas MA200 >>> Melirik Peluang Akumulasi di Saham Perbankan >>> Analisa Saham BUMI: Kuat Bertahan & Berpeluang Kembali Uptrend >>> Analisa Saham JSMR: Bertahan Di Support, What Next? >>> INDF Tertahan Di Area Support Kuat, Berpeluang Rebound >>> ASII Break Minor Support, Sell on Strength >>> ADRO Membentuk Descending Wedges, Berpeluang Rebound Terbatas >>> Wall Street ends flat as early gains evaporate >>> Fed begins policy meeting, tiptoes toward easing >>> Fed meeting to help decide on long-term Treasuries >>> Greece Makes 'Good Progress' in Reform Talks: EC >>> China worried Europe debt crisis will hit trade >>> China could roll out 4.65tr yuan stimulus package >>> IMF sees Mideast stagnation >>> NYMEX-Crude ends higher at Oct contract expiry >>> Asian Crude Palm Oil Up On Technical Buying, Soyoil >>> Foreign net Sell - 61.785.746

Senin, 07 Februari 2011

Indonesia Macro Flash - BI Hikes Rates 25bps to Temper Inflationary Expectations - Citigroup

 Rates hiked 25bps in line with our call, surprises the market — BI hiked the policy rate by 25bps to 6.75% after being on hold for 18 months. This is in line with our view but consensus (15 out of 22 analysts) called for no hike.
 Rising inflationary expectations the reason for hike — BI noted that Jan inflation was still driven by volatile food prices on disruptions to the production and distribution of basic necessities. Nonetheless, BI cites that inflationary expectations are rising, as reflected in the Consumer Expectations Survey, Producer Survey, and financial asset prices. With pressure from volatile food, rising global commodity prices and the planned policy to cut subsidized fuel consumption (which we estimate could add 0.2ppt to headline inflation in March) also driving expectations, BI decided to hike rates “preemptively”.
 Assessment of economic activity remains upbeat — BI expects broadbased 1Q11 GDP of 6.4% and full-year 2011 growth of 6.0-6.5% amid robust domestic demand and the global economic recovery. BI expects a large Current Account surplus in 1Q11 as well as a large Financial and Capital Account surplus on strong FDI inflows. While FX reserves dipped slightly to $95.3bn in Jan (6.3 mos. of imports of official debt repayments) vs. $96.2bn in Dec (7.1 months), BI earlier forecasted reserves to rise back to $112.6bn by year-end.
 What’s new? BI mentioned using IDR to reduce inflation pressures — While noting that IDR weakened about 0.1% in Jan, BI believes that the capital outflows and IDR weakness is only temporary as fundamentals remain strong. What is new in the policy statement (though was mentioned in the media) is BI saying it will manage the rupiah in line with mitigating inflation risks going forward.
 What’s next for rate hikes? — With increasing concern about the need to temper inflation expectations, we maintain our view that BI will hike further this year. Given that we see inflation risks to the upside, we now expect BI will hike another 75bps this year to 7.5% (vs. 7.25%).
 Market implications – IDR stronger; IDR bond curve bull-flattens – Local players appear to have been caught short anticipating no rate change. The IDR bond yield curve bull-flattened post-announcement, with the 10y and 20y tenors lower by about 30bps and the 3y and 7y tenors lower by 10-15bps. We think
rally could be capped ahead of bond auctions next Tuesday. USD-IDR was down quite sharply to 8990-8995 from 9030-9035 and could take further cues from upcoming US NFP data. BI’s ‘surprise’ hike is a welcome relief to the market, but we think Indonesia’s inflation worries are hardly over— we don’t anticipate a sustained rally in IDR bonds just yet.

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