Indonesia's Foreign Reserves Increased - Daily Pack 8 May 2014

Good morning,

Indonesia’s official foreign reserves position increased to USD105.6bn in April from USD102.6bn in March and USD102.7bn in February. The increase in reserves was coming from the government’s oil and gas export revenue. Moreover, the foreign reserves position was equal to 6.1 months of import or 5.8 months of a combined between imports and government external debt servicing. In addition, the foreign reserves position is higher than internationally accepted safe level at around three months of imports

Comment: the pressure in the IDR was seen in late April due to concern over higher current account deficit in the 1Q 2014 from 4Q 2013. During the month, the IDR had depreciated by 1.8% to USD/IDR 11,562, pointing to less intervention from the authorities given the consideration of manageable IDR volatility. The IDR will likely suffer some weakness in the short term due to recent concern over a deterioration in 1Q 2014’s current account deficit. We are off the view that this will likely be temporary. Overtime, in view of improving optimism and foreign investors’ confidence after they have adjusted well to the QE tapering, we expect the IDR to appreciate to an indicative rate of 11,400 IDR/USD at the end of 2014 along with sustainable foreign exchange reserves. (Luthfi Ridho)

FROM TRADING DESK: JCI today is expected to be traded at 4,838.76 and 4,890.02.

MEDIA HIGHLIGHTS:

Express Transindo IDR1trn bond

Garuda Indonesia to takeover Merpati’s routes

SMGR is seeking more funding to build factory

PGAS acquired 36% O&G participating interest worth USD175m in United States

Medco Power to have a USD200m IPO

Best regards,

RHB OSK Indonesia Research Institute

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