Monthly Review - August 2014

MARKET ISSUES

The Seventh President

As Constitutional Court (MK) rejected claims from Prabowo-Hatta on the election dispute, Joko Widodo & his running mate, Jusuf Kalla are set to be the next president and vice president when they are inaugurated in October. The pair won almost 71 million votes (53.15%) against Prabowo Subianto – Hatta Rajasa’s total tally of 62.5 million votes (46.85%). Despite the win, Jokowi will face a tough start of his presidency later on when the new government will be faced with the dilemma of fuel subsidy. Now that the current government has rejected to raise the fuel price, it will be the next one who will have to pull the trigger. Jokowi insists that the subsidy should be reduced and that the spending should be redirected to other uses such as to promote education, health and infrastructure projects.

Growth Slowed

The economy has slowed in the second quarter 2014. GDP growth slowed to 5.12% from 5.21% (1Q14), while the trade balance has swung back to deficit. In June, the balance was recorded at US$300 million of deficit, bringing the first six months trade balance to a deficit of US$1.16b. Inflation was muted however, as the statistical impact of CPI spike due to fuel price hike has waned. As there is no imminent threat on the inflation side and no significant slowdown of GDP growth, Bank Indonesia has decided to stay put and kept rates unchanged.

MBSS Saga

MBSS was sent to the suspension bin in mid-August when Great Dyke brought the company to the PKPU regarding an unsettled debt worth US$2,932,635. The matter was solved after MBSS paid the debt on August 15th. The amount paid has no significant impact on the company’s financial as its cash position was very much adequate to settle the debt. Trading suspension was later revoked.

Cement Sales Down, HBA Fell Again

Cement sales fell in July as Idul Fitri holiday dent construction activities. Sales are expected to recover in subsequent months. ASI’s forecast stays between 4% to 5% growth in sales in 2014. Elsewhere, HBA fell for another 2.98% to US$70.29 per ton from US$72.45 per ton (July). According to Ministry of Energy and Mineral Resources, coal production is likely to be capped at 425 million ton per year.

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