Indonesia's Foreign Capital Inflows US$6.3B in 1Q 2019
Governor of Bank Indonesia Perry Warjiyo. Photo by TheInsiderStories.

JAKARTA (TheInsiderStories) – Good morning. Bank Indonesia (BI) provides the market with a sense of stability and confidence by delivering the fifth hike to the reference seven-day reverse repurchase rate on Thursday.

The hike, by 25 basis points to 5.75 percent, had been largely expected by the market. The hike was pretty much within the ‘pre-emptive’ strategy that BI has undertaken since Governor Perry Warjiyo took office.

BI also introduced the domestic non-deliverable forward market, hoping to ease pressures on the Rupiah due to speculations in offshore market.

The market responded positively to the decision. The Jakarta Composite Index ended up 1.0 per cent at 5,929 and the rupiah strengthened to 14,919 per US$1 from 14,938 per US$1.

Another good news come from the divestment of Freeport McMoRan Gold & Copper Inc’s shares in PT Freepot Indonesia (PTFI) to state-owned mining holding PT Indonesia Asahan Aluminium (Inalum). The two parties and Rio Tinto, which holds a participating interest in PTFI, signed a sales purchase agreement worth US$3.85 billion.

After the transaction, which will be completed by the end of this year, Inalum will get 51.23 per cent ownership in Freeport Indonesia, up from currently 9.36 per cent. The agreement will give President Joko Widodo a huge popularity boost in his re-election bid as Freeport’s divestment issue has failed to gain significant momentum under the previous administration.

On the corporate news, Indonesia’s oldest Islamic lender PT Bank Muamalat is still without no viable rescue plan after Tahir, one of Indonesia richest person, denied reports that he is preparing to acquire the ailing bank. Muamalat badly needs capital injection due to problems arising from weak financial performance and rising non performing loan.

Previous attempts to inject capital into the Islamic lender had been rejected by Financial Services Authority.

While, mid-sized lender PT Bank Danamon Indonesia Tbk (IDX:BDMN) has secured Rp3.9 trillion from selling its 70 per cent ownership in insurance unit PT Asuransi Adira Dinamika. The transaction will help the lender to consolidate its business after Japan’s financial behemoth MUFG Bank acquires a 40 per cent stake.

However, financial market in Asia may experience pressure today as US President Donald Trump ratchets up the rhetorics in the ensuing trade war with China. The billionaire President accused China of trying to influence the outcome of US midterm elections and that his friendship with Chinese counterpart Xi Jinping was over.

From politics, the opposition camp’s attempts to court voters include a re-branding campaign of the image of its Presidential candidate Prabowo Subianto. Dubbed as the new Subianto, the opposition wants to shrug off the image of the presidential candidate as a strict military and unapproachable military man.

He made a curious decision to attend the Chinese national day reception and praised the world’s second-largest economy as holding an important role for Indonesia. A similar move and remarks by Widodo will be interpreted differently by the opposition camp.

The ruling coalition, meanwhile, threw a jab by accusing that the opposition’s reported seed fund for the 2019 election, which stands at Rp2 billion (US$137,931), is an example of dishonest move.

US$1: Rp14,500

May you have a profitable day.

Written by TIS Intelligence Team