JAKARTA (TheInsiderStories) – S&P Global Ratings views Indonesian corporate rating having a good prospect after general elections with a little risk of operation, but not the main catalyst for operations.

“Election mostly neutral for corporate credit dynamic. Less event risk but not a major catalyst for operations,” said Xavier Jean, Senior Director Corporate Ratings at S&P last week in one seminar in Jakarta.

Jean believed President Joko Widodo’d second term would also provide a second wave economic orientation to the development of more passionate sustainable infrastructure projects, one heart of his re-election offering, is likely to encourage further loan growth to the strongest countries in the ASEAN.

As of his first term who starting in infrastructure projects worth Rp5,519 trillion (US$383.26 billion), ranging from toll roads to ports and power plants to airports, now infrastructure projects is still continuing.

Looking to the post-election outlook, he said that for the real estate sector, the prospect is a bit better, although it must require a little longer lag to restore investor confidence to invest after the election circle.

“Generally it takes 6-9 months to take after the election. More projects are launched in 2H but the risk of slippage is up to 20,” he said.

Meanwhile, the performance of State-Owned Enterprises (SOEs) is also slightly better. In 2018, a number of directors from SOEs, national and foreign private companies signed an investment and financing agreement for Infrastructure projects with a value of $6.65 billion.

“We see the government reducing price controls by 2H to help cash flow, consolidate the balance sheet,” said Jean.

In the commodity sector, the government is likely to have a more open attitude towards this sector, for example by providing royalties, regulatory certainty, and others. However, the movement of this sector is still waiting and seeing the process of extending investment licenses including investment permits in various regions which tend to hinder the company’s trust.

“What public companies should be seen here, palm oil, coal,” he said.

The analyst said, the performance of the manufacturing industry sector showed more competitive pressure where consumer sentiment became softer. Moreover, the risk of bank credit refinancing seems more open, where the capital market tends to agree to reduce bond offering coupons.

“The issuance of bonds is the only opportunity for the government to alleviate increasingly large debt,” he said.

Analysts link some loan growth with Widodo’ focus on infrastructure during his first term, including cutting bureaucracy for foreign investors and opening the country’s first subway line just weeks before the April 17 election.

In recent years, lenders in this country have attracted interest from foreign banks that are hungry for growth abroad, especially from lenders headquartered in Singapore, Japan and South Korea.

Analysts believe the overflow effects of infrastructure projects on the broader economy in the long term are likely to drive further loan growth.

Written by Daniel Deha, Email: daniel@theinsiderstories.com

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