Morning Briefing: US, China Tension at WTO Session

United States (US) considering a currency agreement with China as a part of a partial trade deal - Photo: Special

JAKARTA (TheInsiderStories) — Good morning! If you thought that the tensions between the United States (US) and China are easing due to the tariff ceasefire, you may be wrong. As these two world’s biggest economy squared off in a World Trade Organization (WTO) session in Geneva, Switzerland, the tension was sparked again.

They accused each other of ruining the multilateral trade system. The US Ambassador for WTO Dennis Shea said, China has been trying to steal strategic industries’ technology and has flooded the US market with the stolen technology products.

Meanwhile, China’s envoy considered the reckless acts of US President Donald Trump government is the root of all the trade war problems. Even so, China expects both countries will move in the same direction, following the Trump-Xi Jinping meeting.

China and the US are scheduled to renegotiate the framework of the trade tariff war again in January 2019, according to US Treasury Secretary Steven Mnuchin. Recently, both countries are focusing on making documents to be agreed upon after the ceasefire finishes. Both parties are currently focusing on making agreement documents ahead of the March 1 ceasefire ending.

From domestic, Indonesian Ministry of Energy and Mineral Resources gave another extension for PT Freeport Indonesia‘s operating permit, through a special mining business license, to 2031. But there are several requirements to obtain the permit, like 51 percent shares divestment to Indonesian hands. A state-owned enterprise, PT Inalum will take over the shares once the transaction is complete.

Ministry of Communication and Informatics has not yet revoked the 2.3 Ghz radio frequency band license of PT First Media Tbk (IDX: KLBV) and PT Internux, both Lippo Group units. The ministry is still waiting for payment, as First Media and Internux have promised to pay what is in arrears, starting from this month.

Moreover, olefin, Aromatic and Plastic Industry Association consider that government’s plan to prohibit plastic bag usage will threaten the US$10 billion project in petrochemical upstream industry. Moreover, they forecast that the industry will be hit by revenue loss of up to 15 percent. The association has submitted an objection to the Jakarta provincial government.

Then, the Financial Services Authority (FSA) is optimistic banking loan growth will be above 12.23 percent for 2019, although it declined in November compared to October. While growth in deposits is predicted to be 11 percent.

The Chairman of Indonesia’s FSA Board of Commissioners,Wimboh Santoso, said that there are various risks that indeed influence economic growth and bank loan, such as normalization of policies in the US due to trade wars.

He said, in November 2018 the growth of bank loans was only 12.05 percent, lower than the realization in October 2018 which reached 13.5 percent. FSA’ Capital Market Supervisory Chief Executive Hoesen added, that the fund raising capital market in 2019 could reach 10-12 percent.

Meanwhile, the net buy position as of Dec. 14, 2018 reached Rp 6.2 trillion (US$427.86 million). These developments are in line with the development of financial markets in other countries.

Moving to politics now, The Election Commission has announced that the Presidential Candidates debate for 2019 election will begin in January. Joko Widodo, along with Ma’ruf Amin and Prabowo Subianto with Sandiaga Uno, face a series of five debates in total.

The first debate will be held on Jan. 17, 2019 and followed by 2 debates, each in the following 2 months. The schedule for the fifth debate is yet to be determined.

While, the Indonesian financial market has bounced back after being down for the last few days. The Rupiah strengthened by almost one percent to 14,380 over the greenback.

The currency power-gain was caused by the US Dollar falling ahead of the Federal Open Market Committee’s meeting. The pressure was sprung because the US will only raise the Fed rate twice next year.

The Jakarta Composite Index rose by 1.54 percent to 6,176.094. The upturn was supported by local investors, while foreign investment recorded a Rp376.91 billion net sell. Accumulatively, Rp50.35 trillion in foreign funds have left the country since early 2018.

May you have a profitable day!

US$1: Rp14,500

Written by Linda Silaen and TIS Intelligence Team