Photo by IDX

JAKARTA (TheInsiderStories) – Good morning. As the Statistics Indonesia will announce consumer price index (CPI) for July today, market participants would like to hear than just “tame inflation”.

While tame inflation is a positive and welcome trend, it has been too long that the statistic is lacking in a sub-reading indicating that the economy is gaining momentum, particularly from the side of household consumption, which accounts more than half of Indonesia’s economy.

From the debt market, the government recorded a strong demand from the bond auction yesterday. The government raised the maximum amount of Rp20 trillion (US$1.40 billion) from auctions of 5-year, 10-years, and 15-year papers as well as treasury bills out of demands totaling Rp45.4 trillion.

The strong demand indicates that investors’ appetite on Indonesian assets are recovering, thanks mostly to Bank Indonesia’s move to raise benchmark rate to counter the rupiah fall in response to policy tightening by the U.S’s Federal Reserve.

The effect may continue till Wednesday as bond investors who missed out the auction typically returned to the secondary market the next day.

The Rupiah ended slightly higher at 14,413 a dollar on Tuesday versus 14,409 a dollar, according to the Jakarta Interbank Spot Dollar Rate. The local unit has not touched 14,400-a-dollar level since July 17.

From the equity market, the Jakarta Composite Index ended gains for seven consecutive days with a drop of 1.52 per cent to close at 5,936.44 on Tuesday (31/07) due to profit-taking motives and sentiments from corporate earnings. The movement of the equity market is likely to be dictated by President Joko Widodo’s announcement that the government will not remove domestic market obligation policy for coal miners.

Meanwhile, the U.S Secretary of State Mike Pompeo will visit Indonesia and meet President Joko Widodo on August 5 to discuss both countries’ 70 years of diplomatic relations. Pompeo, however, is likely to raise the issue of the government’s decision to award PT Pertamina the rights to exploit Rokan oil field, rather than extending the contract of its current operator Chevron, after 2021.

The rights to Rokan represents another milestone for Pertamina, which relies on taking over expiring contract as part of its long-term business plan. However, it remains to be seen whether Pertamina is up to the task, as exploitation of Rokan requires a special set of technique known as enhanced oil recovery.

TIS Intelligence Team, Email: