Weekly Briefing: Return to Normalcy hoped as Presidential Candidates Declared

Parties chairman after lottery number at General Election Commission Office - Photo by KPU

JAKARTA (TheInsiderStories) – Good morning. The declaration of two Presidential candidates and their pairs last week is expected to clear a lot uncertainties for market participants.

The incumbent President Joko Widodo had announced he will pair with popular cleric Ma’ruf Amin. While his challenger is Prabowo Subianto, the founder of Gerindra Party, with his running mate businessman-turned-politician Sandiaga Uno.

The odds look in favor of the incumbent pairing at the moment, as the opposition alliance is fragile over dissents from the Demokrat Party, a member of the opposition camp, on the nomination of Uno, whose political debut was rewarded with Jakarta Deputy Governor after winning a tightly-contested election last year.

Widodo’s nomination of vice presidential candidate was a surprise too. The pick could be a last-minute decision by him as it was initially thought that the candidate was Mahfud MD, a former Constitutional Court chief judge. Amin’s Islamic credential is expected to boost the President’s chance to be re-elected in 2019, considering that in 2014 Widodo suffered from attacks framing him as anti Muslim and pro-communist.

The Coordinating Minister for Economic Affairs Darmin Nasution said the announcement may help investors to have more confidence and avoid taking wait-and-see approach. “None of the candidates would be a worry for the market,” he added.

Another reason for confidence is Indonesia’s accelerating economic growth, at 5.27 per cent on year in second quarter versus 5.17 per cent in first quarter. While it is still a long way from Widodo’s promise of 7 per cent growth, the data shows that the economy is gaining momentum.

Another sign of positive swing in the economy can be seen in the government’s bond auction, which raked bids worth Rp45.44 trillion (US$3.18 billion) with awarded amount of Rp20 trillion. In addition, the government also raised Rp2.5 trillion from private placement.

Several key events will take place this week. On Wednesday (15/08) will be the day that the Statistics Agency announced the trade data and for Bank Indonesia’s monetary policy decision.

Then the next day, President Widodo will deliver its annual address to the House of Representatives and the government will submit its budget bill for 2019. The budget bill can serve as an indicator on his personal conviction on his chance to win the re-election.

An expansive budget will send a strong message, while a baseline scenario may not do the job. Also, typical for a budget during election year, social spending is expected to increase. Infrastructure spending is one particular area to watch, as the economy is gaining traction, spending by the government could have a significant effect.

Moving to overseas, economists and analysts started to assess the full implication of the escalating trade war between the Unite States (U.S) and China. One victim could be the U.S automotive industry which had been slapped with 25 percent tariff by China to retaliate U.S tariffs. Chinese bought more than 270,000 of U.S-made cars in 2017, a gap which now can be filled by other manufacturers.

Another is Turkey which saw its currency, Lira, plunged drastically in recent weeks as its deteriorating relations with the US exacerbated the weak confidence on the economy. There’s a risk that the currency meltdown may spread to the Eurozone, as several of its major financial institutions are exposed to lira.

Hope you have a profitable day.

TIS Intelligence Team, Email: theinsiderstories@gmail.com