Left Brain Right B - the DBS Vickers Securities Equities Research

Regional Equity Strategy 4Q 2009
Country Assessment
next year, driven by recovery in domestic demand and
elevated global commodity prices. Nevertheless, according
to DBS economists, core inflation remains benign as the
economy is still experiencing some excess capacity. As such,
the DBS economic team estimates that BI may start to
moderately elevate the benchmark rate in 3Q10.
Despite BI’s decision to lower benchmark rates in nine
consecutive months since Nov 09, the banking sector
lowered lending rates at a much slower pace. As such, BI
pushed banks to lower lending rate by setting the highest
deposit rate, as the sector always used high cost of funds as
a reason for keeping lending rate high. Last month, BI made
an informal agreement with 14 domestic big banks to cap
deposit rates by 150bp from the BI Rate starting 1 Sep 09
and by 50bp starting 1 Dec 09. As such, we believe that
liquidity should improve further going forward and loan
growth should also accelerate.
Election
The completion of the presidential election has marked a
new era for Indonesia, in that a democratic system and
culture has been established in the country. We believe this
sets a base for a sustainable economic development for
Indonesia. Despite some weakness in the system that
resulted in a legal battle between non-winning candidates
against the election committee, the legal battle itself shows
that any disagreement would have to go through the
constitutional system for a solution.
SBY-Boediono won the presidential election by a significant
61.7% of votes. As such, the election did not have to go
through a second round. The absolute victory of SBY-
Boediono also signalled that the elected president will have
a strong government with more independence from its
coalition parties in selecting ministers, which are expected to
be filled by bureaucrats and professionals rather than
politicians.
Election result
SBY-Boediono
Megawati-
Prabowo
JK-Wiranto
Source: KPU
5.0% 15.0% 25.0% 35.0% 45.0% 55.0% 65.0%
The victory also gives expectations that there will be no
significant change in the new economic team with its
prudent and accommodative economic policies. The new
government is also expected to accelerate the development
of badly needed infrastructure in Indonesia, which is a
significant problem for the country. However, once the
development is realized, it will drive the economy faster
given the expected US$34bn expected to be spent on
infrastructure projects for 2009- 2017, as indicated by the
National Planning Agency (Bapenas) data.
New surprise development from JORR project in West Jakarta – infrastructure development will be accelerated
Source: Kompas
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