Morning Briefing: Trade War Tension Back Into Fray

After long hours debate, United States House of Representative impeached President Donald Trump based on two articles of abuse of power and obstruction of Congress - Photo by White House

JAKARTA (TheInsiderStories) – Good Morning. United States (U.S) President Donald Trump appeared to be frustrated that China has not caved in on its tough tariff policy. As we know, that the U.S Administration may slap 25 percent tariff on US$200 billion worth of Chinese imports to America, more than double the original plan of 10 percent.

There’s a sign that China economy started to feel the effect of U.S tariff. The Caixing/Markit Purchasing Manager’s Index, a gauge of China economic activity, hit the lowest level in eight months.

Trade talk could be one of the key issue raised by U.S Secretary of State Mike Pompeo when meeting with President Joko Widodo on July 5. Indonesia could be next on the crosshair of U.S administration tariff policy due to a significant trade surplus, which reached US$4.1 billion in the first six months this year.

From domestic side, several economic indicators released on Wednesday (01/08) were largely positive. Indonesia’s inflation rate accelerated to 3.18 percent on year in July from 3.12 percent on year in June, keeping along with the them of ‘tame inflation’.

Meanwhile, Indonesia’s foreign tourist arrivals reached 1.32 million in June, rising by 15.21 percent from a year ago. Indonesia’s manufacturing Purchasing Managers’ Index was up slightly 50.5 in July from 50.3 in June.

Another good news for Indonesia is the falling crude oil prices, which recorded the biggest single-month drop in July since 2016 as oil producer cartel OPEC ramps up output

Turning to market now. The Jakarta Composite Index rose 1.6 percent to end at 6033.42 yesterday, with foreign investors net bought stocks worth Rp630 billion. The Rupiah weakened to 14,442 a dollar versus 14,413 a dollar on Tuesday (31.08).

Other positive catalyst for investor is Bank Indonesia continues with its policy reformulation program with the introduction of new overnight interbank reference rate IndoNIA, which will replace the Jakarta Interbank Offered Rate or JISDOR. In its first fixing on Wednesday, the IndoNIA was set at 4.98 percent, lower than JISDOR.

In theory, lower overnight interbank rate may encourage banks, especially the smaller ones, to borrow from each other, thus leading to less concentration in liquidity. At that same day, BI also released the new loan to value policy for property to boost consumer spending.

On bank-related news, the Financial Services Authority announced that it has given a green light for Japan’s MUFG Bank to increase its ownership in PT Bank Danamon Tbk (IDX: BDMN) to 40 per cent from currently 19.9 per cent. The ultimate aim is for MUFG to hold 73.8 per cent stake in Danamon.

Hope you have a profitable day.

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