BI Policy and Banks — Indonesia market and banks are going through a correction from near-peak multiples due to inflation concerns. Bank Indonesia is adamant that the current inflation rise (6.96% in Dec 2010) is temporary, driven by food prices. Administrative measures, along with currency appreciation and capacity additions in the economy will bring headline inflation down to within its tolerance limit of 5% + 1%. While BI did not give any indication of a rate hike, Citi forecast s a 75bps increase in rates, starting with 25bps in March 2011 and followed by two more increases of 25bps in June and September. Our concern is that 1) BI may be too dovish, and 2) higher food inflation will impact debt servicing capacity of consumption related borrowings, particularly 2W.
Currency and Capacity Additions — BI is of the opinion that core inflation will be contained by currency appreciation and capacity additions. In 2011, it expects Current Account surplus with FDI of USD14bn and Portfolio inflows of c~USD9bn. The current capacity utilization in the economy is below 80% and with Investment growing at of 8.5% in 2010 (real terms), the additional supply will take care of rising demand.
Loan growth of 19-23% in 2011 — BI expects 19-23% loan growth in 2011, following 22% in 2010, but is it waiting for banks to submit their business plans to know the composition of these loans. Higher proportion of Consumer loans will add to inflationary pressure. In 10M to Oct 2010, loan growth was 16.6%, with Consumer loans growing 19%, Working Capital 16.9% and Investments 12.1%.
Proposed Bond Fund — The second area of interest in the Conference Call was the proposed Bond Fund, but few details were disclosed. Foreign investors hold c~USD22bn of bonds and their sell off will be negative for both bond yields and currency. Ministers of Finance and State Owned Enterprises have signed a Memorandum of Understanding that in case of bond sell off, state-owned entities will be asked to pick up these bonds. BMRI, BBNI and BBRI are the three largest stated-owned banks and will have to bear the burden, in our opinion.
Fiscal Side remains Strong — Fiscal Deficit in 2010 was only 0.6% of GDP, against budgeted 2.1%. Lower deficit was due to higher revenue collection (2.2% above budgets) and lower expenditure (6.5% below). Subsidies were marginally below the budget and savings were from other expenditure, including infrastructure spending.
Tidak ada komentar:
Posting Komentar