RHB Indonesia Morning Cuppa - 16 September 2016- (Trade Balance)

Good morning,

Trade Balance: Both Exports and Imports Recover in August

¨ Indonesia’s exports contracted by a smaller magnitude of 0.7% y-o-y in August, from -17.0% in July. This was driven by a smaller decline in oil & gas and a rebound in non-oil & gas exports, indicating a recovery in economic activities after Eid Fitr and school holiday season in July.

¨ Imports, likewise, contracted by a smaller magnitude of 0.5% y-o-y in August, from -11.6% in July. The softer contraction in imports was due to rebound in crude oil and non-oil & gas imports and a smaller drop in oil product imports. These were, however, partly offset by a larger contraction in gas imports.

¨ In August, the trade account continued to record a surplus of USD0.3bn, albeit lower than the previous month. This points to a lower trade surplus in 3Q 2016, suggesting the country’s current account deficit (CAD) in the balance of payments could deteriorate during the quarter.

¨ Moving forward, the global economy still faced with many downside risks and it is in its seventh year of growth in the current cycle in 2016 where the late stage of an economic growth cycle tends to be associated with higher downside risk. This suggests that Indonesia’s exports will likely remain challenging and we expect the country’s real exports to grow marginally by 0.9% in 2016, compared with -2.0% in 2015. (Rizki Fajar)

Link to report: Both Exports and Imports Recover in August

Link to Daily report: Indonesia Morning Cuppa - 160916

Media Highlights:

Economics

Bank Indonesia allows banks to sell foreign currency call spread options

Indonesia Tax Amnesty recorded a sizable increase of IDR11trn

Sri Mulyani expects further contraction in budget deficit

Corporates

Ministry of Transportation to review new scheme for LRT budget

The Ministry of Transportation has yet to allocate budget to construct the LRT for Jabodetabek for the 2017 budget due to the limited allocation. The cost of LRT project is estimated around IDR5trn per year with total costs of IDR20trn spread within 4 years. The ministry is in the midst of reviewing a payment scheme based on availability to reduce the burden for the 2017 state budget and shift it to investors. In the scheme, the government will examine the possibility of the contractor to be a part of the operator as well. The ministry also proposed a possibility of extending Adhi Karya’s (ADHI IJ, BUY, TP: IDR4,400) payment if the company remains only as a contractor for the infrastructure. (Bisnis Indonesia)

Comment: based on our conversation with Adhi Karya, the company will stay as main contractor of the project sinceaccording to the new presidential decree, KAI will be the operator. Instead, Government will likely to invite other investor to finance this project. Moreover, Adhi expects that LRT contract can be signed in October. (Dony Gunawan)

Kawasaki and Wijaya Karya will cooperate to build IDR3.42trn Antam’s ferronickel plant

Pembangunan Perumahan record IDR19.42trn new contracts as of 8M16

Tower Bersama prepares IDR1.5trn for share buyback

Dua Putra Makmur to increase capacity by 10k tonnes

Hero to open seven new stores

Kino to continue “Cap Kaki Tiga” brand

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