Money Supply Moderated, Economic Activities Expected To Remain Stable - Daily Pack 7 April 2014

Money Supply Moderated, Economic Activities Expected To Remain Stable

¨       Indonesia’s Money Supply (M2) growth moderated further to 10.9% y-o-y in February, from +11.6% in January and +12.70% in December. The slower M2 growth was due to a slowdown in domestic activities in February. This was reflected in a moderation in private credit due to a sharp jump in borrowing costs after the Central Bank increased interest rates aggressively in 2H 2013. Similarly, net claims on the central government fell by a larger magnitude in February due to low government spending realisation following the seasonal pattern of fund disbursements. These were, however, mitigated by a pick-up in net foreign asset during the month.

¨       Similarly, the growth of deposit and credit eased further in February. As a result, the loan to deposit ratio of the banking system held steady at 93.7% in February. Going forward, we expect the private credit to continue slowing down, as we foresee the tightening bias to prevail in 2H 2104 after remaining stable in the 1H. 

¨       The inflow of foreign capital has led to a further appreciation of the IDR. In view of improving optimism and foreign investors’ confidence, we expect the IDR to appreciate further to an indicative rate of 11,400 IDR/USD at the end of 2014 along with higher foreign exchange reserves.  (Luthfi Ridho)

FROM TRADING DESK: JCI today is expected to be traded at 4,939.15 and 4,854.20

MEDIA HIGHLIGHTS:

Telkom to complete Mitratel Sale in 3Q14

Shareholders of Indonesia’s Telkom approve IDR9.9trn dividend

Holcim Indonesia to integrate two subsidiaries to improve efficiency

Sritex aims FY14 sales to reach IDR7.2trn (+25.8% y-o-y)

Government will limit imported flour

Government to spin-off PLN

Best regards,

RHB OSK Indonesia Research Institute