nbf p 17264811

7/29/2019 Nbf p 17264811

1/40

7/29/2019 Nbf p 17264811

2/40

7/29/2019 Nbf p 17264811

3/40

Oce of Chief Economist Page 3 of 40

What about the prospects for both indicators in 2013? For

inflation, as long as no government policy on the subsidized

fuel price increases, it is expected that inflation will remain

subdued, despite a 15% hikes in electricity tariff and an

average increase of the provincial minimum wage by around

20%. Mandiri economic team expects inflation to be at 5.4%

with core inflation remained under control at a range of 5%. A

positive factor of our economic growth is balanced growth on

both sides, i.e. the demand side (private consumption) and the

production side (investment). As a result, the price stability

can be maintained, reflected by stable core inflation. The

absence of an increase in subsidized fuel price will make

inflation indeed remain low in 2013; however, the cost to be

borne is the ballooning budget of subsidized fuel in the 2013state budget to nearly IDR 200 trillion, or about 12% of the

total state budget of 2013. This surely cannot be maintained if

we want to continue to balance the domestic sector in the

medium term. The government must courageously take a fuel

price adjustment policy, given the distortion of the non-

subsidized fuel price and the subsidized fuel price is so large,

reaching more than 2 times. This large price distortion will not

give incentives to the running of the energy conversion

program and even it will encourage inefficiency in the use of

energy resources as well as further encourage the smuggling

of subsidized fuel. As a result, it is possible that the realizationof subsidized fuel in the 2013 state budget will exceed its

budget as it did in the last 2012 state budget.

And what about the prospect of our trade balance? The low

global demand as economic recovery in developed countries

takes slower than expected will surely give a limited space for

our exports to return to normal. Instead, the rapid investment

growth and robust private consumption along with the

growing middle class society will encourage the growth of

imports along this year. Moreover, in the absence of an

appropriate policy on subsidized fuel, the consumption ofsubsidized fuel is estimated to exceed the Governments

target, which will further encourage increased imports. As a

result, the deficit in our trade balance is expected to continue

to occur this year or in other words the external sector

imbalances will continue this year.

7/29/2019 Nbf p 17264811

4/40

7/29/2019 Nbf p 17264811

5/40


to depreciate, lowers Loan to Value ratio and raises Down

Payment for property and automotive sectors and raises

interest rates of Bank Indonesia Deposit Facility (FASBI) by 25

basis points in August 2012. These policies aim to restrain

import growth acceleration and less productive investments.

The combination of these policies is expected to be reapplied

by BI in 2013 when the deficit in the trade balance

deteriorates, thus expanding our current account deficit.

From the government side, some policies that have been and

will be conducted by the government include encouraging

downstream industries so as to reduce dependence on

imported raw materials and capital goods, application of

export duties and regulations on trade and provision of taxincentives for some strategic industries in tax holiday for 5-10

years to improve the competitiveness of national industries. In

the near future the Government will also implement a policy

on tightening importation of consumer goods, such as mobile

phones, laptops and tablet computers in order to encourage

domestic production and reduce imports of consumer goods.

These policies are aimed to encourage companies producing

these products to make Indonesia its production base of their

business and not just using Indonesia as a market for their

products. Thus, the impact on Indonesia will be more positive,

because it can create new jobs for Indonesian workers.

If the above steps and policies are executed consistently and

continuously by the Government and BI, it is expected that

our external imbalance problems can be overcome in the

medium term. Of course, the classic problem in our economy

over the years ie. the availability of adequate infrastructure,

must also be our common concern and need to be improved.

Thus, Indonesias sustainable economic growth can be realized

through a balance in domestic and external sectors.

7/29/2019 Nbf p 17264811

6/40

Oce of Chief EconomistPage 6 of 40

Bond Market Outlook 2013

Handi Yunianto ([email protected])

Low yield, higher volatility

Rupiah bond market again delivered strong gains in the last

four years although the return continued to decline, as the

yields have extremely been low. Foreign fund inflows and

warehousing of government bonds by Bank Indonesia

remained as the key pillars of support for the bond market in

2012.

For 2013, we expect yields to remain low but with increased

volatility and minimal scope for bond prices to appreciate

further. Some catalysts that will support low yields in 2013:

Low inflation and flush liquidity as a result of the ultra-loose

monetary policies resorted by most central banks , Bank

Indonesia still is projected to be the big potential buyer of

government bonds to speed up its plan to use the bonds as

monetary instruments to replace SBI. We expect the 10-year

government bonds will trade between 5.2-5.5% in 2013, thus

we believe the return of investing in the government bonds

this year will be lower than 2012. Volatility might increase, as

foreigners still dominate the government bond ownership,

while the rupiah is still under pressure, trading above to IDR

9.800 against the US dollar.

Three risks that must be considered are: (1) higher supply of

government bonds due to potentially increasing budget deficit

(2) higher inflation if government increases subsidized fuel

prices and (3) expectation of rupiah further weakening that

can trigger foreign fund outflows.

Bond outlook for 2013: yields to remain low but volatility

might increase

As the yields has extremely low level compared to history and

global economic outlook will likely record a mild recovery,

assessing bond market outlook 2013 will be more challenging

than usual. However, we still believe that low yields might be

sustained but higher volatility in 2013, as foreigners remain

7/29/2019 Nbf p 17264811

7/40


dominant in government bonds and rupiah currency trading

closed to IDR 9.800 levels against US dollar.

Some catalysts to support low yields in 2013

There are at least four factors to support low yield in our view:

1. Interest rate will remain low. Austerity measure

undertaken by the Euro area, lackluster economy in the US

and economic slowdown in China hampered global

economic recovery. The IMF revised down its world

economic growth forecast to 3.3% and 3.6% in 2012 and

2013 from 3.5% and 3.9% respectively in October forecast.

With fiscal problem continue, we believe ultra low interest

rate will be kept longer that will make demand for higher-yielding assets should remain firm. According to

Bloomberg market consensus survey, Fed Fund Rate and

ECB rate projected at lower rate i.e. 0.25% until mid 2015

and 0.75% until mid of 2014. On domestic news, we

expect inflation rate will remain within the range of BIs

target although at upper bound of the 3.5-5.5% due to

increasing electricity tariff and assuming no increase in

fuel price subsidies. Thus, BI rate will likely be kept stable

at 5.75%.

0

1

2

3

4

5

6

Dec-04

Dec-05

Dec-06

Dec-07

Dec-08

Dec-09

Dec-10

Dec-11

Dec-12

Dec-13

Rate(%)

FFR

ECB rate

Figure 1. The IMF revise down its world economic growth forecast to 3.6% in 2013 from 3.9% in

October forecast (left figure). Low interest rate will keep longer that will make demand on higher-

yielding asset should remain firm (right figure). (Source: IMF, Bloomberg)

7/29/2019 Nbf p 17264811

8/40


2. Indonesias economic fundamental has proven its

resiliency. Solid domestic demand and significant growing

in investment make Indonesian source of growth morebalance and it make more resilient to global economic

slowdown. Our economist expects economy is likely to

remain robust in 2013 at 6.3%. The impact of the global

economic slowdown, we believe, is to be limited as it

could be compensated by the domestic demand supported

by healthy consumer purchasing power, lower cost of

fund, and faster infrastructure development. The increase

in minimum wage will also be one of the catalysts, as it

transfers income from capital owners to

households/labors. Investment spending will also be

projected to continue to be strong on the back of foreigndirect investment and infrastructure development.

3. Continue stronger fiscal health. When the average debts

to GDP ratio for countries in the developed world is on

average at 114% and rising, meanwhile in Indonesia the

ratio in only 38% as of Sep12 and will likely continue to

fall. This will support low yields relative to the developed

world. Meanwhile, the budget deficit level is still

maintained at a safe level of only IDR 153.3tn (1.7% of

GDP), and the ratio of government debt is also targeted to

continue to decline to a level of 23% of the GDP 2013.Solid economic fundamentals will be positive for bonds

market as the sovereign rating is projected to be

maintained at investment-grade level with stable outlook.

1.9

2.7 2.93.1

0.6

2.1

2.6 2.4

(2.0)

(1.0)

-

1.0

2.0

3.0

4.0

5.0

6.0

7.0

2006 2011 9M12 3Q12

GDP growth contribution

(ppt)

Net exports

Gross Fixed Capital Formation

Government spending

Private consumption

BBB-

BB+

BB-

B+

B-

B

B+

BB-

BB

BB+

BBB-

Jun-97

Dec-97

Jan-98

Feb-98

Mar-98

Aug-02

Nov-03

Jan-05

Feb-08

Jan-10

Dec-11

Fitch Rating For Indonesia's Sovereign Debt

S&P : BB+ (Positive)

Moody's : Ba1 (Stable)

Fitch : BBB- (Stable)

Figure 2. Indonesia GDP still projected 6.3% although global economic tend to weaken; private

consumption and investment are engine of growth (left figure). Stronger fiscal health will be

maintained Indonesia investment grade level in 2013 (right figure). (Source: CEIC, DMO)

7/29/2019 Nbf p 17264811

9/40


4. Supply of government bonds to be higher in 2013, but

still manageable, as government will issue new

instruments. Higher issuance of government bonds is

inevitable as the government uses it as the main source of

funding for its budget deficit. The budget deficit is

expected to be 1.7% of GDP or IDR 153.3tn in 2013.

Although it is expected to be lower than in 2012 (IDR

190tn but the realization might be lower to deficit IDR

156tn), the net bond issuance is expected to rise to around

IDR 178tn as it plans to reduce offshore loans by IDR

19.4tn. As maturing bonds in 2013 will reach IDR 80tn, the

government is projected to issue IDR 281.3tn in gross

amount, including bond buyback. Although higher

issuances, total outstanding government bonds to GDPwas still projected low i.e. 16% as of 2013 vs. 16.2% in

2012. In addition, government also plans to issue new

instrument in 2013 i.e. USD issuances for domestic and

opening the green shoe option to fulfill the target.

Hopefully, this plan will generate deeper financial system

and attract further USD liquidity parked offshore.

If we compare with the 2012 strategy, there are no significant

policy changes in government securities financing strategy.

1. Optimizing domestic market by issuing rupiah bonds.

According to debt management strategy, government will

continue to issue bonds more on domestic rather than

global issuances. In 2012, the government reduced global

0

5

10

15

20

25

30

35

40

2007 2008 2009 2010 2011 2012

DebttoGDP%

1.1

0.5

0.9

1.3

0.1

1.6

0.7

1.3

2.2

1.7

-50

0

50

100

150

200

250

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Rp tn

0.0

0.5

1.0

1.5

2.0

2.5

% of GDP

Other/Non Debt-Nett

External Loan - Nett

Goc't Securites - Nett

Budget Deficit, % of GDP

Government

securities financing

strategy in 2013: not

change significantly

Figure 3. Government uses bond issuances as the main source of funding for budget deficit (left

figure). However debt to GDP ratio continues to decline (right figure). (Source: DMO)

7/29/2019 Nbf p 17264811

10/40


bond issuances slightly to 21% of total gross issuance

although slightly higher than initial target of 18% and

average 23% in the last five years. The government again

plan the maximum global bond issuance is 14% of the total

issuances for 2013. It will be including plan to sell

USD500mn-1bn for domestic investors in 2H 2013. Thus, it

will need to issue IDR 241.9tn in the local currency

including private placement and retail bonds-in the form

of conventional and syariah papers- in 2013. Assuming

that private placement and retail bond issuance will be the

same as in 2012 of IDR 26.3tn and IDR 15.3tn respectively,

the government still needs to issue IDR 16.7tn on average

per month or slightly higher than IDR 14.3tn in 2012.

2. Maintain front loading policy. We still believe that the

government will do front-loading strategy in order to

mitigate the impacts of global uncertainties. This strategy

will also be in line with government maturity profile, which

projected more than IDR 48tn governments bonds will

mature in 1H while only IDR 32tn in 2H 2013. Government

announced new benchmark series for 2013 i.e. 5-yr

FR0066, 10-yr FR0063, 15-yr FR0064 and 20-yr FR0065.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2009 2010 2011 2012

1Q 2Q 3Q 4Q

87.0102.4

137.2

174.1

212.9241.9

39.3

46.7

25.2

30.4

55.9

39.4

-

50

100

150

200

250

300

2008 2009 2010 2011 2012 2013-

Target

Rpt

rillion

0%

5%

10%

15%

20%

25%

30%

35%

Do me st ic I ssu an ce s G lobal I ssuan ce s

% Global to t otal issuances (RHS)

Figure 4. Continue optimizing domestic market by issuing rupiah bonds (left figure). We expect

front loading policy will continue (right figure). (Source: DMO, Mandiri estimate)

7/29/2019 Nbf p 17264811

11/40


Bonds

MaturityDate Coupon(%) Duration(yrs) Price as of31-Dec-12 YTM (%)

FR066 May-18 5.25 4.7 102.74 4.67

FR063 May-23 5.625 8.0 104.25 5.09

FR064 May-28 6.125 10.2 103.85 5.74

FR065 May-33 6.625 11.6 106.18 6.09

3. Lengthening liability duration. With flattened yield curve

and government aim to mitigate refinancing risk, we

believe that government will continue to lengthening their

duration liability as they projected to issue more long-term

debts, with those over 10 years targeted to be 57% of the

total issuances, while the 1-year notes only 14%.

2011 2012 2013F

Budget deficit 88 190 153

% of GDP 1.3 2.2 1.7Net Issuances 121 160 178

Redemption and

Buyback84 109 104

Gross issuances 205 269 282

Domestic bonds 174 85% 213 79% 243 86%

Conventional FR/VR 99 48% 123 45%

T-bills/ZC bonds 41 20% 31 11%

Retail bonds (ORI &

Sukuk)18 9% 26 9%

Domestic sukuk 5 2% 17 6%

Private placement 11 5% 15 5%

Global bonds 30 15% 56 21% 39 14%

Yankee bonds 21 10% 39 14%

Global sukuks 9 4% 10 3%Samurai bonds 0% 7 2%

0 5 10 15 20 25 30

Q1

Q2

Q3

Q4

Rp trillion

Fixed

Fixed Retail

Non tradale

Sukuk Ijarah

Sukuk Ijarah Retail

Zero Coupon Bill

Zero Coupon Bond

Figure 5. New government bond benchmark series for 2013 (left figure). More than IDR 48 tn bonds

will mature in 1H while only IDR 32 tn in 2H 2013 (right figure). (Source: DMO, Mandiri estimate)

Figure 6. Lengthening government bonds liability duration might continue (left figure). Gross

issuances by instrument: Sukuk issuance projected to increase (right figure). (Source: DMO, Mandiri

estimate)

7/29/2019 Nbf p 17264811

12/40


After foreigners and bank Indonesia became the biggest net

buyer in 2012, we believe that it will be the same for 2013 due

to the low yields offer currently in market. Foreigners booked

the highest net buy of the government bonds followed by

Bank Indonesia, who together snapped up almost 69% of net

issuances in 2012. Pension funds and mutual funds we believe

will continue to switch their portfolios from government

bonds to time deposit, corporate bonds and the stock market

to enhance their returns. Demand from mutual funds might

also continue to lessen since a 5% tax will be slapped on

mutual fund industry over this year and it will give the same

tax treatment of 15% in 2014. In 2012, mutual funds cut their

portfolio in government bonds a total IDR 3.9tn. While

pension funds government bonds add quite significant by IDR

22.1n, but we believe the data is misleading as theres IDR

22.8tn of transfer bonds from insurances happened in 4-Dec

and 26-Dec which should be the same entity. Excluding

transfer transaction, pension fund portfolio in government

bonds fell by IDR 0.7tn in 2012 after reporting net sell of IDR

3.1tn in the last two consecutive years.

Bank Indonesia is still buying government bonds to speed up

its plan to use the bonds as monetary-policy instruments to

manage liquidity in the financial market to replace SBI. Bank

Indonesias active purchases of government bonds will notboost liquidity as the central bank absorbs back some of the

liquidity through reverse-repo deals. In 2012, BI bought

government bonds totaling IDR 18.7tn although lower than

2011 which reported IDR 42.8tn, but reverse repo with banks

totaling IDR 81.4tn or almost 18% of their Open Market

Operation (OMO) (vs. only 12% in 2011). Under the base

scenario, BI would need to buy an additional IDR 78tn

assuming excess liquidity growth is in line with nominal GDP

(11%), SBI outstanding constant (IDR 78.9tn) and increasing

tradable securities to 47% of OMO. We calculate that

weighted average yield to maturity of government bondsowned by Bank Indonesia is 6.3%. We believe this is the

support level for rupiah bond market in 2013, currently the

average yield to maturity of government bond is 5.5%.

Demand outlook: We

believe there will be no

significant changes in

bond investors in 2013

Bank Indonesia is still

projected to be the big

potential buyer of

government bonds to

speed up its plan to use

the bonds as monetary

instrument to replace

SBI.

7/29/2019 Nbf p 17264811

13/40


*) based on survey by MoF

**) Theres IDR 22.8tn of transfer bonds from insurances happened in 4-Dec and 26-Dec which should be the same entity.

Excluding transfer transaction, pension fund portfolio in government bonds fell by IDR 0.7tn in 2012 after reporting net

sell of IDR 3.1tn in the last two consecutive years.

According to the latest survey by the Ministry of Finance, the

net potential demand for government bonds for 2013 is

projected to reach almost IDR 80tn. This is still lower than its

2010 NetBuy

2010 %ownership

2011 NetBuy

2011 %ownership

2012 NetBuy

2012 %ownership

2013 NetBuy*)

Foreigners 87.3 30 27.6 31 47.7 33 n.a

Banks (39.4) 33 (5.1) 29 10.9 27 32.7

Bank Indonesia (2.4) 4 42.8 9 18.7 10 n.a

Onshore-non banks 13.8 33 17.1 31 19.4 30 47.2

Insurances **) 6.7 12 13.8 13 (9.5) 10 2.4

Mutual Funds 5.9 8 (3.9) 7 (3.9) 5 6.0

Pension Funds **) (0.8) 6 (2.4) 5 22.1 7 12.4

Others 2.0 7 9.6 7 10.7 8 26.4

Total 59.3 100 82.4 100 96.7 100

0

50

100

150

200

250

Feb-11 May-11 Aug-11 Nov-11 Feb-12 May-12 Aug-12 Nov-12

R

pT

rillion

Government Bonds owned by Bank Indonesia

SBI

0

5

10

15

20

25

30

Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12

% of OMO

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000BI's

ownership in

government

bonds (Rp bn)

Figure 8. Bank Indonesia continues buying government bonds to speed up its plan to use the bonds

as monetary policy instruments (left figure). Reserve repo continues to increase in OMO of Bank

Indonesia (right figure). (Source: Bloomberg, Mandiri estimate)

Figure 7. New government bond benchmark series for 2013 (left figure). More than IDR 48 tn bonds

will mature in 1H while only IDR 32 tn in 2H 2013 (right figure). (Source: DMO, Mandiri estimate)

7/29/2019 Nbf p 17264811

14/40


issuance target for this year, but the survey does not include

retail and global bond issuances. The highest demand might

be coming from banks i.e. IDR 53.4tn followed by others and

pension funds, which are projected to be IDR 25.1tn and IDR

12.4tn respectively.

We made a portfolio simulation to compare their performance

due to some yield curve scenario in 2013. There are three

scenarios (1) Yield curve stable at current level. As yield curve

in 2012 has normal shape, thus investors can sell the bonds at

lower yields by YE13 we called it riding the yield curve. (2)

Using implied forward yield curve (3) Using fair yield

regression model assuming that BI rate stable at 5.75%,

inflation rises slightly to 5.5%, the rupiah appreciate slightly to9,600 and the Fed Fund Rate stable at 0.25% thus the two-and

ten-year bond yields are predicted to be 4.7% and 5.4% in

2013. From three scenarios, we found that the barbell

strategy will give the optimum performance this year but the

return is much lower than 2012. We also suggest overweight

on corporate bonds with good ratings, as their risk premiums

are still higher than the average long-term spread.

Yield movement

outlook and their

potential returns

in 2013

4.5

4.8

5.2

5.9

6.3

5.6

6.1

6.4

5.1

4.8

5.0

4.7

5.4

6.1

6.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

0 5 10 15 20

Time to maturity (yrs)

YTM (%)

Scenario 1: Yield curve stable

Scenario 2: Implied Forward

Scenario 3: Fair yield model

4.6 4.6 4.64.5

1.9

2.83.0

3.3

3.6

3.2

2.6

3.8

-

1

2

3

4

5

6

FR0063 FR0064 FR0065 FR0066

Expected Total

Return 2013 (%)

Scenario1: Yield curve stable

Scenario 2: Implied forwardl

Scenario 3: Fair yield model

Meanwhile, latest

survey by MoF

showed that Banks

and Others investors

are the highest net

potential demand for

government bonds in

2013.

Figure 9. Yield curve scenario in 2013 (left figure). Projected lower bonds return expectations in

2013 (right figure). (Source: Mandiri estimate)

7/29/2019 Nbf p 17264811

15/40


There are still some critical risk factors in our opinion that

might drag down return in bond market in 2013:

1. Weakening rupiah following deteriorating current

account data

The rupiahs movement against the US dollar will be the

most critical factor to be watched as foreign investors

holding in the governments rupiah bonds is still high.

Historically, the rupiahs depreciation usually triggered

fund outflows as foreigners tried to reduce exchange rate

risks. Widen current account deficit underpinned by

weaker exports, stronger import growth, and higher

income repatriation from FDI might increase pressure on

the rupiah currency. Based on our sensitivity calculations,if the USD rises above IDR9,828/USD, it can trigger foreign

outflows since the average entry point of foreigners into

Indonesia's government bond market since 2009 is

IDR9,130/USD and average yield at 7.8%.

2. Increasing inflation due to risk increase in subsidized fuelprices

Rising inflation could be triggered by increase in subsidized

fuel prices in 2013. As the government delayed the fuel

price subsidy increase this year, fuel subsidies are rising

significantly. In 2012, energy subsidies are projected reach

3.6% of GDP (IDR306tn) or higher than in 2008 and 2005 of

2.8% and 3.5% of GDP respectively when subsidized fuel

However, there are

two main risks

investing in thegovernment bonds

2013: weaker rupiah

against USD and

rising inflation.

(40,000)

(30,000)

(20,000)

(10,000)

-

10,000

20,000

30,000

Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12

Rp

bn

4

5

6

7

8

9

10

11

Aerage

YTM%

Foregn inflow/(outflow) - LHS

YTM - RHS

(40,000)

(30,000)

(20,000)

(10,000)

-

10,000

20,000

30,000

Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12

Rpbn

8,000

8,500

9,000

9,500

10,000

10,500

IDR

/USD

Foregn inflow/(outflow) - LHS

IDR - RHS

Figure 10. Average entry level of foreign into Indonesias government bond market since 2009 was

average yield at 7.7% (left figure). Average entry level of foreign into Indonesias government bond

market since 2009 was IDR 9,130/USD (left figure). (Source: DMO, Mandiri estimate)

7/29/2019 Nbf p 17264811

16/40

7/29/2019 Nbf p 17264811

17/40


As a conclusion, for 2013 we expect low yields might be

sustained but with higher volatility and minimal bond price

appreciation. Some positive factors: (1) low inflation and flush

liquidity as a result of the ultra-loose monetary policies

resorted by most central banks and (2) Bank Indonesia is still

projected to be the big potential buyer of government bonds

to speed up its plan to use the bonds as monetary instrument

to replace SBI. We look for the 10-year government bonds will

trade at range of between 5.2-5.5% in 2013, thus we believe

the return of investing in government bonds will be lower

than 2012. To enhance the return, we maintain suggestion to

overweight on corporate bonds with good ratings, as their risk

premiums are still higher than the average long-term spread.

Risk factors that must be considered are: (1) higher supply ofgovernment bonds (2) higher inflation if government increases

subsidized fuel prices (3) weakening in the rupiah following

deteriorating BoP data that can trigger foreign fund outflows.

IDR corporate bond market outlook 2013: Continue to

improve

Corporate rupiah bond market continues to improve as new

issuances reported IDR 69.3tn the highest in history. We

believe there are four factors behind significantly corporate

bonds issuances Rupiah in 2012:

1. Lower risk-free yields that make cost of borrowing in

bond market continue to decline.

2. Refinancing motives are higher as there are IDR 24tn

bonds matured in 2012.

3. Robust domestic economic growth will trigger

companies to expanse their business. Thus, total

issuances continue to be higher than maturing bonds

(IDR 58.8tn vs. IDR 24.2tn in 2012). The only amount of

issuance which is less than the matured one happened

in 2008, as yield rose significantly amid soaringsubprime mortgage crisis in US.

4. New regulation by Bapepam-LK on Continual Public

Offering (Penerbitan Umum Berkelanjutan) that allows

companies easier to issue bonds as it only requires a

one effective statement for a period of two years. Note

that there is 25 companies used this new regulation

totaling IDR 44.4tn issuances in 2012.

Total issuances in

2012 recorded the

highest in history; we

still expect issuances

will remain high in2013

7/29/2019 Nbf p 17264811

18/40


We believe that all those factors will still be positive for 2013.

As we expect that risk-free yields would continue to remain

low this year, we believe appetite for corporate bond issuance

is also still high. In 2013 and 2014 there is also IDR 22.8tn and

IDR 31.9tn which will mature, also trigger refinancing motives

to remain high in 2013. We expect total issuances of

corporate bonds will range IDR 50-60tn this year. Multi

finances and banking still the most dominant sector that

issued bonds. However, the trend is declining as some new

sectors starting coming to the market such as infrastructure,

property and mining.

In the secondary market, trading activity is also rising

following higher demand as government bond yields

continued to decline. Trading volume reported IDR 0.6tn on

average per day or almost double compared to average last

two years. Liquidity risk in corporate bonds also lower asforeign ownership in corporate bonds also continued to

increase to 5.7% from 4.8% from total outstanding in 2011.

We still maintain our prediction that corporate bonds will

continue to improve in 2013 both in the primary and

secondary markets.

Financial

Company

40%

Banking

26%

Consumer

Goods

9%

Telecommunica

tion

7%

Automotive

Related Industry

5%

Mining Oil &

Natural Gas

3%

Property &

Construction

6%

Transportasi

0%

Infrastructure

2%

Advertising,

Printing & Media

2%

30.0

12.9

29.7

38.944.8

69.3

13.3

24.4

13.9 12.4 11.7

27.5

84.6

73.0

88.8

115.3

148.4

190.2

0

20

40

60

80

100

120

140

160

180

200

2007 2008 2009 2010 2011 2012

New Issuances

Matured

Outstandings

Figure 13. Total outstanding amount of Rupiah corporate bonds continue to increase (left figure).

However, financial companies still dominate issuance (66.5% of total issuance in 2012) (left figure).

(Source: IDX)

Liquidity risk is lower

as trading volume

continue to improve

due to high average

size issuances per

series and increasing

foreign ownership

7/29/2019 Nbf p 17264811

19/40


Since global crisis in 2008, most of local investor institution

has limited their investing in corporate bonds only at very high

rating at least A rated. As almost 95% of corporate bonds

ownership is dominated by local investors, thus new issuances

-

100

200

300

400

500

600

700

2007 2008 2009 2010 2011 2012

x

-

500

1,000

1,500

2,000

2,500

Rpb

n

Average trading volume per day

Freq trading

3.0%

3.5%

4.0%

4.5%

5.0%

5.5%

6.0%

Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12

%o

ftotalouts

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

Rpbn

Portfolio amount (RHS)

Share of total outs (LHS)

Bonds NameMaturity

DateRating

Duration

(yrs)

Coupon

(%)

Outstanding

(RP bn)

Avg trading

volume per

day (Rp bn)

Last

transaction

Date

Price YTM (%)

PNBN04SB Subordinasi Bank Panin I I I Tahun

2010

17-Nov idAA-

/A+(idn)

3.8 10.5 2,460 24 27-Dec-12 100 10.5

MEGA01 Subordinasi Bank Mega Tahun 2007 13-Jan BBB(idn) 0.1 11.5 1,000 21 27-Dec-12 100.03 10.7

ASDF01CCN1 Obligasi Berkelanjutan I Tahap I

Tahun 2012 Seri C

17-Feb idAA+ 3.5 8.6 2,250 6 3-Jan-13 100.3 8.51

ADMF01CCN3 Obligasi Berkelanjutan I Tahap III

Tahun 2012 Seri C

17-Sep idAA+ 3.9 8.75 673 9 14-Dec-12 100.05 8.74

ADMF01BCN3 Obligasi Berkelanjutan I Tahap III

Tahun 2012 Seri B

15-Sep idAA+ 2.5 7.75 578 19 28-Dec-12 100 7.75

ASDF01ACN2 Obligasi Berkelanjutan I Tahap II

Tahun 2012 Seri A

13-Oct idAA+ 0.8 6.65 589 16 3-Jan-13 100.08 6.54

APLN02 Agung Podomoro Sei II Tahun 2012 17-Aug idA 3.8 9.38 1,200 10 2-Jan-13 100 9.37

ISAT08B Indosat Seri VIII Tahun 2012 Seri B 22-Jun idAA+ 6.6 8.88 1,500 7 28-Dec-12 105.64 8.02

BNGA02SB Subordinasi I I Bank CIMB Niaga

Tahun 2010

20-Dec AA(idn) 5.5 10.85 1,600 9 26-Dec-12 107.9 9.43

SANF02C SAN Finance II Tahun 2012 Seri C 15-Jan AA(idn); 1.9 8.4 807 11 26-Dec-12 101.89 7.4

BMTR01B Global Mediacom I Tahun 2012 Seri

B

17-Jul idA+ 3.6 10.5 1,000 18 2-Jan-13 100 10.5

BBTN01CN1 Obligasi Berkelanjutan I Bank BTN

Tahap I Tahun 2012

22-Jun idA A/AA (id

n)

6.7 7.9 2,000 9 21-Dec-12 101.15 7.73

ISAT08A Indosat VIII Tahun 2012 Seri A 19-Jun idAA+ 5 8.63 1,200 8 14-Dec-12 103.42 7.95

MEDC03 Medco Energi Internasional I II Tahun

2012

17-Jun idAA- 3.8 8.75 1,500 6 20-Dec-12 100 8.75

BNII01SB Subordinasi I Bank BII Tahun 2011 18-May idAA 4.2 10.75 1,500 8 21-Dec-12 105.5 9.44

Credit risk

measurement: Still

positive as mostly

corporate revenue was

driven by domestic

demand

Figure 14. Trading in secondary market also improved following rising demand as government

bond yields continue to fall (left figure). Foreign participant continue to rise (left figure). (Source:

IDX)

Figure 15. Top 15 the most active bonds traded in secondary market . (Source: IDX)

7/29/2019 Nbf p 17264811

20/40


coming to the market are also much selected and mostly

higher than A rated. Weighted average credit score bonds

rating issuances in 2012 is 3.4 (AA rated) slightly lower than

2011 i.e. 3.3. According to Pefindo rating agency calculation,

probability of default 1 year ahead of higher A rated was only

4.4%. This condition also affects lowering defaulted bonds in

2012.

We try to calculate a simple Altman Z-Score model for all non-

financial companies that listed in bourse. We found that

shipping marine transportation and wood-based sector still

gives the lowest score. Meanwhile the highest scores

reported by consumer and retail sectors. Based on the latest

transaction data, some corporate bonds names haveattractive valuation in our view are JMPD14JM10, SSMM01B

and TBLA02.

A ve ra ge S tD ev

AAA 101 183 224 108 337 244 223 273 270 169 62

AA+ 117 207 242 122 356 267 262 301 302 190 66

AA 135 234 261 138 376 292 308 333 337 214 71

AA- 157 264 282 156 397 319 362 367 376 241 77

A+ 182 298 304 177 419 350 425 406 420 272 84A 210 337 328 200 442 383 499 448 469 307 93

A- 244 381 354 226 467 419 586 495 524 346 105

BBB+ 282 431 381 256 492 458 689 547 585 390 119

BBB 327 487 411 289 520 501 809 604 654 441 136

BBB- 378 550 444 327 549 549 951 667 730 499 158

1 1- De c 1 2- De c2004-Oct2012

7-Dec 8-Dec 9-Dec 10-DecRating 4-Dec 5-Dec 6-Dec

Figure 16. One year rating transition rate (1996-2010). (Source: Pefindo)

Figure 17. Theoretical risk premium by rating: still higher the average long-term spread . (Source:

IDX)

7/29/2019 Nbf p 17264811

21/40


Sectors

Average

Rating

The

highest

Rating

The lowest

Rating

Number

bond

series

Total

outstanding

bondsBanking 4.2 1.0 9.0 96 70,588

Financial Company 3.4 2.0 9.0 113 48,155

Infrastructure 2.9 2.0 6.0 29 21,618

Telecommunication 2.1 1.0 4.0 18 13,350

Mining Oil & Natural Gas 5.3 3.0 9.0 12 8,427

Consumer Goods 3.9 2.0 6.0 12 8,340

Property & Construction 5.9 4.0 8.0 17 6,230

Automotive Related Industry 4.8 3.0 6.0 13 3,494

KIK EBA 1.0 1.0 1.0 5 2,206

Wood Based & Agro Industries 14.5 6.0 18.0 6 1,967

Advertising, Printing & Media 5.0 5.0 5.0 2 1,250

Securities Company 7.2 6.0 9.0 5 850

Shipping & Marine Transport Services 12.5 7.0 18.0 4 842

Fertilizer 3.0 3.0 3.0 2 791

Chemicals 5.7 5.0 7.0 3 773

Retail 4.7 4.0 5.0 6 757

Poultry 2.0 2.0 2.0 1 300

Transportasi 8.0 8.0 8.0 1 150

Computer and Peripheral 8.0 8.0 8.0 1 900%

2%

4%

6%

8%

10%

12%

(2) (1) - 1 2 3 4 5 6

Altman Z-Score

YieldS

preada

verRiskfree

JMPD14JM10SSMM01B

TBLA02

Figure 18. Average rating per sector (left figure). Altman z-score and yield spread comparison (rightfigure). (Source: IDX)

7/29/2019 Nbf p 17264811

22/40


Sector

Company Rating

Altman Z Score

TypeFY11

3Q12

/2Q12 *

Chemicals Lautan Luas id A- 1.91 1.79 Manufacture (Public)

Automotive Services Serasi Autoraya id A+ 1.20 1.36 Non-Manufacture

Consumer Goods Bentoel AAA (idn) 3.14 2.75 Manufacture (Public)

Fast Food Indonesia id AA 7.42 8.42 Manufacture (Public)

Indofood Sukses Makmur id AA+ 3.30 3.08 Manufacture (Public)

Mayora Indah id AA- 4.20 4.87 Manufacture (Public)

Fertilizer Pupuk Kaltim id AA 2.77 2.81 Manufacture

Industrial Selamat Sempurna id AA- 3.61 2.97 Manufacture

Infrastructure Jasa Marga id AA 2.17 3.72 Non-Manufacture

Perusahaan Listrik Negara id AA+ 1.03 1.14 Non-Manufacture

Media Global Mediacom id A+ 4.07 4.58 Non-Manufacture

Mining Oil & Natural Gas Aneka Gas Industri BBB (idn) 1.24 1.23 Non-Manufacture

Aneka Tambang id AA 4.78 4.01 Non-Manufacture

Apexindo Pratama Duta id A 1.22 1.24 Non-Manufacture

Medco Energi International id AA- 1.59 1.52 Non-Manufacture

Trading and Logistics AKR Corporindo id AA- 3.10 3.04 Non-Manufacture

Pastoral & Agricultural Malindo Feedmill id AAA 4.41 4.71 Manufacture (Public)

Japfa id A 3.98 3.62 Manufacture (Public)

Plantation BW Plantation id A 2.18 2.08 Manufacture (Public)

Salim Ivomas Pratama id AA 2.51 2.59 Manufacture (Public)

Sinar Mas Agro Resources and Tech id AA- 4.97 4.63 Manufacture (Public)

Tunas Baru Lampung id A 2.40 2.19 Manufacture (Public)

Property & Construction Adhi Karya id A 1.70 1.65 Non-Manufacture

Agung Podomoro Land id A 3.41 3.03 Non-Manufacture

Bakrieland Development id B 0.75 0.46 Non-Manufacture

Bumi Serpong Damai id A+ 3.47 3.53 Non-Manufacture

Summarecon Agung id A 2.33 2.32 Non-Manufacture

Surya Semesta Internusa id A 1.10 1.10 Non-ManufactureWaskita Karya id A- 1.76 1.28 Non-Manufacture

Telecommunication Indosat id AA+ 1.46 1.27 Non-Manufacture

Telkom id AAA 3.92 4.15 Non-Manufacture

Retail Matahari Putra Prima id A+ 1.95 2.05 Non-Manufacture

Mitra Adiperkasa id AA- 4.10 4.38 Non-Manufacture

Shipping & Marine

Transport Arpeni Pratama Ocean Line

id D

(disc) (1.13) (2.64) Non-Manufacture

Bahtera Adimina Samudra n.a. (28.05) (173.14) Non-Manufacture

Berlian Laju Tanker id D 0.63 0.63 Non-Manufacture

Transportation Panorama Transportasi id BBB+ 1.00 1.00 Non-Manufacture

Wood Based & Agro

Industries Ciliandra Perkasa id A+ 2.24 2.35 Manufacture

Indah Kiat id D 0.53 0.48 Manufacture

Lontar Papyrus id D 0.13 0.09 Manufacture

Pindo Deli id D 0.63 0.65 ManufactureTitan Petrokimia Nusantara A+ (idn) 1.36 1.43 Manufacture (Public)

Tjiwi Kimia id BBB 1.13 1.12 Manufacture (Public)

Figure 19. Altman z-score calculation. (Source: Bloomberg, Mandiri Estimate)

7/29/2019 Nbf p 17264811

23/40


Strengthening Domestic Connectivity Towards ASEAN Economic

Community (AEC) 2015Mamay Sukaesih ([email protected])

ASEAN as a regional organization has become an important

factor in the economic order, politics and global security.

According to IMF data, the GDP share of ASEAN-5 to the global

GDP was 3.65% with a GDP value of USD 1,827.6 billion in

2011. In terms of the economy, ASEAN countries have a

diverse economic profile and main exports. Cooperation

between ASEAN countries has a strategic role and is able to

influence a variety of important activities in the order ofinternational relations to be able to spearhead international

cooperation through trade and capital flows or investments.

ASEAN connectivity will assist in the facilitation of a single

market and a more integrated production network and

encourage trade and investments between the countries in

the region. A simple description of ASEAN connectivity is as

shown in Figure 20.

Figure 20. Interaction Between ASEAN Connectivity and ASEAN Economic Community. (Source:

Masterplan on ASEAN Connectivity)

7/29/2019 Nbf p 17264811

24/40


Development of Intra-ASEAN Trade

Target of realized ASEAN connectivity is only 2 years away.

But, the homework related transportation sector for

Government and Private has still many. ASEAN connectivity

can be an opportunity and challenge for Indonesia. Indonesias

readiness towards ASEAN connectivity is essential that the

ASEAN connectivity can give positive impacts on the economy.

Proportion of intra-ASEAN trade to total ASEAN trade has

increased for 10 years, from 21,8% in 2001 to 25% in 2011.

Intra-ASEAN export growth was 256%, from USD 86.3 billion in

2001 to USD 309 billion in 2011. Meanwhile, intra-ASEAN

import growth was 282%, from USD 71.3 billion in 2001 to

USD 272.5 billion in 2011.

Furthermore from 7 ASEAN countries, Singapore, Thailand and

Malaysia have trade surplus in intra-ASEAN trade for 5 years.

Singapore has the largest trade surplus in 2011. While

Indonesia, Cambodia, Philippines and Vietnam have trade

deficit. In intra-ASEAN trade, share of Singapores export to

ASEAN countries and share of Singapores import from ASEAN

countries was the largest in 2011. Meanwhile, share of

Indonesiae export to ASEAN countries and share of

Indonesias import from ASEAN countries was 14% and 19%. It

shows that Indonesia has still become market for ASEAN

countries. The opportunity of ASEAN community has not been

used optimal by Indonesia.

Figure 21. In 10 years, proportion of intra-ASEAN trade to total ASEAN trade has increased, from

21,8% in 2001 to 25% in 2011. Singapore, Thailand and Malaysia have trade surplus in intra-ASEAN

trade for 5 years (Source: ASEAN Community in figure 2011 and Intracen)

Intra-ASEAN Trade Trade Balance intra-ASEAN by Countries

7/29/2019 Nbf p 17264811

25/40


Indonesias Competitiveness in ASEAN

The level of competitiveness of Indonesias transport

infrastructure among ASEAN countries is still relatively low.

Indonesias infrastructure quality was ranked 92nd of 144

countries in the Global Competitiveness Report (GCR) in

2012/2013, lower than the Global Competitiveness Report

(GCR) in 2011/2012 which was ranked 82nd out of 142

countries. Of eight ASEAN countries included in the CGR in

2012/2013, the quality of Indonesias infrastructure was

ranked on the third lowest (before Philippines and Vietnam)

and was below the global average of infrastructure quality

rating.

Furthermore, almost all the transport infrastructure quality

suffered a downgrade from the previous year and was below

the global average except the railway infrastructure quality.

The lowest transport infrastructure quality in the CGR in

2012/2013 was the port infrastructure, which was ranked

104th of 144 countries. The rating of the port infrastructure

quality was at the third lowest of the eight ASEAN countries

included in the CGR in 2012/2013. Meanwhile, the road

infrastructure quality and the air transport infrastructure

quality were respectively ranked 90th and 89th out of 144

countries in the CGR in 2012/2013. When compared to the

Share of Export intra-ASEAN Trade by Country, 2011 Share of Import intra-ASEAN Trade by Country, 2011

Figure 22. In intra-ASEAN trade, share of Singapores export to ASEAN countries and share of

Singapores import from ASEAN countries was the largest in 2011. (Source: Intracen)

Others

6% Others

6%

7/29/2019 Nbf p 17264811

26/40


other eight ASEAN countries included in the CGR in

2012/2013, it was the second lowest ranking for the road

infrastructure quality and the third lowest ranking for the airtransport infrastructure.

Infrastructure Quality Rating in CGR in 2012/2013

Road Infrastructure Quality Rating in CGR in 2012/2013 Railway Infrastructure Quality Rating in CGR in

2012/2013

Air Transport Infrastructure Quality Rating in

CGR in 2012/2013Port Infrastructure Quality Rating in CGR in

2012/2013

Figure 23. Competitive level of the transport infrastructure quality of Indonesia was still relatively

low. In the Global Competitiveness Report (GCR) in 2012/2013, Indonesia was ranked 92nd of 144

countries. When compared to other ASEAN countries, the position of the Indonesias infrastructure

ualit was at the third lowest rankin . Source: Global Com etitiveness Re ort

Competitive Level of Transport Infrastructure Quality of

Indonesia

7/29/2019 Nbf p 17264811

27/40


Compared to other ASEAN countries, Indonesia has the

longest road length in ASEAN. But, Indonesias paved network

only 65.85% of road length. This percentage was under

Singapore (100%), Philippines (79.2%), Malaysia (81.1%),

Thailand (94.5%) and Brunei (92.2%). Based on world bank

data, cost to export in Indonesia reached USD 644 per

container in 2012. Indonesia was at 4th the highest of cost to

export in ASEAN. While, cost to import in Indonesia reached

USD 660 per container in 2012 or 4th the lowest of cost to

import in ASEAN.

Road Length in ASEAN countries, 2011 Percentage of Paved Network to Road Length in ASEAN

countries, 2011 (%)

Figure 24. Indonesia has the longest road length in ASEAN but the percentage of paved network to

road length in Indonesia was 6th largest in ASEAN countries. (Source: ASEAN Statistics)

Cost to Export (USD per Container) Cost to Import (USD per Container)

Figure 25. Indonesias Cost to export was at 4th the highest in ASEAN. While Indonesias cost

import was at 4th the lowest in ASEAN. (Source: World Development Indicators)

7/29/2019 Nbf p 17264811

28/40

7/29/2019 Nbf p 17264811

29/40

7/29/2019 Nbf p 17264811

30/40


To improve domestic connectivity, the Government has issued

a Masterplan for the Acceleration and Expansion of

Indonesias Economic Development (MP3EI) 2011-2025 in

May 2011. Financing of MP3EI for transportation sector was

Proportion of Transport Sector to Nominal GDP

(%)

2012*: cumulative of quarter I to quarter III

Proportion of Transport Sub-sector to Nominal GDP,

2012* (%)

Figure 27. Transport sectors contribution to GDP in 2012* was 3.43%, lower than 2007. Road

transport had the greatest contribution. (Source: BPS)

Growth of Transport Sector and National GDP

(%yoy)

2012*: cumulative of quarter I to quarter III

Growth of Transport Sector GDP, (% yoy)

Figure 28. Growth in the transport sector since 2009 was above the national growth despite the

decline in 2012*. This decrease was because the growth in the air transports and railway transports

decreased significantly. Even since 2011, the growth of railway transports was negative. (Source:

BPS

7/29/2019 Nbf p 17264811

31/40


mainly for road infrastructure. The sources of financing of

MP3EI were from Government, SOE, and Private. However,

the realization of MP3EI is felt not optimal.

The realized investment of MP3EI in 2012 reached IDR 623.91

trillion, IDR 243 billion of which is allocated for road

infrastructure, transports and water resources and energy.

Meanwhile, the indication of MP3EI investment needed in

2014 reached IDR 4,012 trillion. In 2013, the Government planto build twelve of new airport. For port infrastructure, the

Government is going to build ninety one of port and

implement Pendulum Nusantara concept. The Government

also is going to build railway to Soekarno Hatta Airport.

Conclusion

The weak competitiveness of Indonesia compared to other

ASEAN countries is a challenge to be overcome before the

application of the ASEAN connectivity. Indonesia with the

largest population in ASEAN, which amounted to 39.1% of the

total population of ASEAN in 2010, will only be a market forother ASEAN countries if there is no improvement in the

domestic connectivity. Accelerated implementation of the

domestic connectivity concept is very important since the

implementation of the ASEAN connectivity is only 2 years

away.

MP3EI: Indication of Infrastructure Investment (IDR Tn)

Figure 29. Financing of MP3EI for transportation sector was mainly for road infrastructure.

(Source: KP3EI)

7/29/2019 Nbf p 17264811

32/40


Commodities Insight: Natural Rubber

M. Ajie Maulendra ([email protected])

Global natural rubber consumption in 2013 is estimated at

11.6 million tons or 4% growth (yoy). Growth in rubber

consumption in 2013 is higher than in 2012 by 2.4% (yoy).

Consumption growth is still coming from the auto sector

growth, especially in China and Asia regions. Meanwhile,

demand from the European Union this year is expected to fall,

because of unsolved recession. As an illustration, the EU

demand for natural rubber in the first half of 2012 fell by 15%

(yoy). A bright outlook of global demand for natural rubber isalso seen in the positive expectations of auto sales in the

United States (U.S.). In Q3 of 2012 and Q4 of 2012, U.S. auto

sales grew by 13.8% (yoy) and 10% (yoy), and the positive

trend is expected to continue in 2013 in line with the

agreement of the U.S. government in the management of

fiscal policy to prevent the United States from the threat of

recession. U.S. auto sales this year is expected to reach 15

million units, up 4.2% from 14.4 million units from the last

year.

Natural rubber consumption growth in Asia is expected to

record positive trend in 2013. As it is supported by the Chinese

governments infrastructure spending plan announced in

September 2012, Chinas natural rubber consumption in 2013

has been forecasted to grow by 5.5% (yoy). These China

infrastructure projects is believed can boost the production of

automotive and transportation sectors. Automobile

purchasing in India also supports Indias rubber demand,

which is expected to grow by 4% (yoy) in 2013. Meanwhile,

Japan is expected to grow only 2% (yoy), given its economic

recovery from the disaster of 2011 is still running slow. As

economic recession is still haunting EU, rubber consumption in

EU in 2013 is expected to fall -0.1% (yoy). On the

otherside,U.S. rubber consumption, which is mostly absorbed

to automotive sector, is forecasted to grow by 4% (yoy) in

2013.

Thailand, Indonesia and Malaysia are known as the

International Tripartite Rubber Council (ITRC) because these

three countries become the largest producers of natural

7/29/2019 Nbf p 17264811

33/40


rubber. Thailand became the largest producer of natural

rubber with 3.5 million tons rubber production in 2012, while

Indonesia took in second place with 3 million tons rubberproduction in the same period, followed by Malaysia with

natural rubber production of 946 thousand tons in the same

period.

The worlds natural rubber production in 2013 is forecasted to

grow 4% (yoy) or reach 11.7 million tons. Global rubber

production this year is estimated to be better than last year.

Several assumptions support the reason are favorable climate

condition, restrictions on rubber exports by the three

countries ended in March 2013 will improve rubber price and

provide incentive to farmers in doing tapping. The rubberprice in 2013 (on average) is expected to increase compared

to 2012. Data from the Economist Intelligent Unit (EIU) shows

that the average price of rubber in 2013 is estimated at 3.9

USD/kg, up by 1.4% yoy from 3.8 USD/kg in 2012. Bullish

factors to the rubber price are also caused by the global

rubber stocks in 2013, which are expected to be tighter than

the previous year. This is caused by the impact of export

restrictions by the three countries, which have been

implementing from October 2012 and will have been finished

by March 2013. If rubber price are still under pressure, ITRC

will extend its policy.

Countries of members of rubber manufacturers association or

the International Tripartite Rubber Council (ITRC), Indonesia,

Thailand and Malaysia, agreed to cut exports of 300,000 tons

natural rubber from the three countries this year. This was

motivated by the deteriorating rubber price during the first 8

months of 2012 which reach USD 2.5/kg (in August), or down

by 28% (ytd) from the beginning of 2012 at USD 3.2/kg.

Indonesia gets a rubber export quota reduction of 117 000

tons, Thailand of 140,000 tons and Malaysia of 43,000 tons.

GAPKINDO stated that 117 000 tons reduction in Indonesias

rubber exports was divided into two periods. First, October to

December 2012 period, rubber export cut by 60% or 70,200

tons. Secondly, January to March 2013 rubber export will be

cut by 40% or 46,000 tons. Once the restriction plan was

announced on August 16, 2012, the rubber price (the Daily

Composite Price in the three countries) immediately jumped

7/29/2019 Nbf p 17264811

34/40


from USD 2.54 per kilogram to around USD 2.9 per kilogram in

early December 2012. Currently, the rubber price (rubber

Tokyo market) was at the level of USD 3.3/kg. ITRC will askVietnam to join ITRC to maintain the rubber price stability. In

fact, statistically, Vietnam rubber production also has a fairly

high portion in Southeast Asia (in 2012 it exceeded 860

thousand tons). Four countries, namely Indonesia, Thailand,

Malaysia and Vietnam, will control 74 percent of the world

market.

The Rubber Association of Indonesia (Gabungan Perusahaan

Karet Indonesia Gapkindo) set rubber export allocation for

each region in Indonesia. South Sumatra will be the largest

rubber exporter followed by North Sumatra, Jambi and WestKalimantan. Started on October 1, 2012, during the last three

months of 2012, South Sumatra had rubber export allocation

of 206,779 tons per month. Meanwhile, North Sumatra had

export allocation of 51,037 tons per month, and Jambi of

30,627 tons per month.

3,790

1005777

2,390

1,134

264

1,107

616

94

China

India

Japan

Other

Asia

EU O

ther

Europe

North

America

Latin

America

Africa

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

2008 2009 2010 2011 2012 2013F

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

Konsumsi Karet Alam Global Pertumbuhan KonsumsiGlobal Consumption of

Natural RubberProduction Growth

Figure 30. Worlds consumption of natural rubber (left figure). Natural rubber demand in several

contries (right figure). (Source: EIU, IRSG)

Worlds Consumption of Natural Rubber

(Million Ton)Natural rubber demand in Several Countries

(000 tons)

7/29/2019 Nbf p 17264811

35/40


Thailand, 31.2%

Others, 7.5%

Vietnam, 7.7%

India, 8.2%

Malaysia, 8.4% Indonesia,

26.8%

Cte d'Ivoire,

2.2%

Brazil, 1.2%

China, 6.8%

Country 2011 2012 Growth

United States 12,733,015 14,440,574 13.4%

China 18,533,406 17,493,506 -5.6%

India 2,512,441 2,563,196 2.0%

Japan 4,210,227 5,031,230 19.5%

Indonesia 894,164 1,026,768 14.8%

Europe 16,850,926 15,049,083 -10.7%

Automotive Sales in Several Countries

(unit)

Shares of Global Natural Rubber Production,

2012

Figure 31. Automotive sales in several countries (left figure). Shares of global natural rubber

production (right figure). (Source: EIU, IRSG)

US Japan China Singapore South Korea

3.

4 3.

8

3.

6

4.

6

6

5.

6

4.

9

4 4.

2

3.

9

3.

7

3.

7

3.

78

3.

9

3.

94

0

1

2

3

4

5

6

7

Q110

Q210

Q310

Q410

Q111

Q211

Q311

Q411

Q112

Q212

Q312

Q412

Q113

Q213

Q313

Q413

0

20

40

60

80

100

120

Rubber Price (lhs) WTI Price (rhs)

Worlds Natural Rubber Prices

(USD / kg)Market Shares of Indonesias Natural Rubber

Exports in Some Countries of Major Destination

Figure 32. Worlds natural rubber (left figure). Market shares of Indonesias natural rubber exports

in some countries of major destination (right figure). (Source: EIU)

2.76 2.75

2.4

2.7

3 3.04

2.77

2007 2008 2009 2010 2011 2012 2013F

Figure 33. Indonesias Natural Rubber Production. (Source: Ministry of Agriculture)

Indonesias Natural Rubber Production

(mn ton)

7/29/2019 Nbf p 17264811

36/40


mandiri leading economic index (LEI)January2013

Mandiri Leading Economic Index (MLEI) fluctuated in the

range of 99.2 to 100.7 during the period of January to

November 2012. The index has decreased to 100.6 (-

0.1%MoM) in November 2012, from an increased 0.4%MoM

in October 2012. From several constituent indicators of MLEI

such as JCI index, export index, exchange rate index and the

volume of savings index showed a decline in November 2012.

It is predicted that the domestic economy will still experiencea relatively flat growth at current level to 2Q13.

From recent data, Indonesia's trade deficit in November 2012

narrowed from the previous month's record high, but exports

remain weak in line with the uncertainty in global economy.

The trade deficit narrowed to USD 480 million from a record

high USD 1.54 billion in October 2012. In November 2012,

imports rose grew 9.92 % (YoY), slower than October's 10.8%

(YoY) increase. Exports in November 2012 were down 4.6%

(YoY) or less than the previous month's 7.61% (YoY) drop.

Trade deficits in the G20 economy also have put pressure onthe rupiah which weakened around 6,0% against US Dollar in

2012. Indonesia is bracing for stagnant exports due to weak

overseas demand attributed to the sluggish recovery of the

global economy.

Indonesia's GDP (gross domestic product) grew 6.2%YoY in

3Q12 (was above 6,0% for the eighth straight quarter) as

domestic consumption and investment remained strong

despite a deteriorating global economy. Although Indonesia's

economy has so far remained resilient in the face of a global

slowdown, The Government said that Indonesias economymight only expand by about 6.6% this year, versus the initial

forecast of 6.8% as stated in the 2013 State Budget Law and

Rupiah might trade as low as 9,700 per US Dollar in 2013, is

weaker than that stipulated in the 2013 state budget, which

requires the currency to trade at an average of 9,300 to the

greenback.

7/29/2019 Nbf p 17264811

37/40

7/29/2019 Nbf p 17264811

38/40


MACRO ECONOMIC INDICATORS AND FORECAST 2007 2008 2009 2010 2011 2012F 2013F 2014F

National Account

Real GDP (% yoy) 6.3 6.0 4.6 6.2 6.5 6.3 6.3 6.6Domestic Demand (% yoy) 6.0 7.5 5.4 5.3 5.7 6.6 6.7 7.5

Real Consumption: Private (% yoy) 5.0 5.3 4.9 4.7 4.7 5.3 5.3 5.5

Real Consumption: Government (% yoy) 3.9 10.4 15.7 0.3 3.2 3.0 2.9 5.8

Real Gross Fixed Capital Formation (% yoy) 9.3 11.9 3.3 8.5 8.8 10.8 11.1 11.9

Real Exports (% yoy) 8.5 9.5 (9.7) 15.3 13.6 1.0 4.6 7.0

Real Imports (% yoy) 9.1 10.0 (15.0) 17.3 13.3 4.8 6.5 8.5

GDP (IDR tn) - nominal 3,951 4,949 5,606 6,436 7,427 8,392 9,579 10,893

GDP (USD bn) - nominal 432 511 539 708 846 893 993 1,125

GDP per capita (USD) - nominal 1,916 2,234 2,328 2,981 3,572 3,723 4,090 4,579

External Sector

Exports (%yoy,USD) - Merchandise 14.0 18.3 (14.3) 32.1 27.0 (5.1) 7.0 9.0

Imports (%yoy,USD) - Merchandise 15.4 36.9 (24.0) 43.7 30.3 8.5 9.0 9.0

Trade Balance (USD bn) 32.8 22.9 30.9 30.6 34.8 10.6 7.7 8.4

Current Account (% of GDP) 2.4 0.0 2.0 0.7 0.2 (2.4) (2.3) (1.8)

Current Account (USD bn) 10.5 0.1 10.6 5.1 1.7 (21.7) (23.3) (20.3)

External Debt (% of GDP) 32.7 30.4 32.1 28.6 26.6 27.8 27.5 26.7

International Reserves (USD bn) 56.9 50.0 66.1 96.2 110 111 113 118

Import cover (months) 8.0 5.1 8.9 9.1 8.0 7.4 6.9 6.6

IDR/USD (period average) 9,139 9,692 10,408 9,087 8,776 9,396 9,646 9,681

IDR/USD (year end) 9,235 11,028 9,470 8,963 9,000 9,670 9,606 9,677

Other

BI rate (% period average) 8.4 8.8 6.9 6.5 6.6 5.8 5.8 5.8

BI rate (% year end) 8.0 9.3 6.5 6.5 6.0 5.8 5.8 5.8

Headline Inflation (% yoy, period average) 6.4 10.3 4.3 5.3 5.1 4.3 5.4 4.9

Headline Inflation (% yoy, year end) 6.4 11.1 2.8 7.0 3.8 4.5 5.4 4.7

Fiscal Balance (% of GDP) (1.3) (0.1) (1.6) (0.6) (1.5) (1.6) (1.5) (1.5)

S&P's Rating - FCY BB- BB- BB- BB BB+ BB+ BB+ BB+

S&P's Rating - LCY BB+ BB+ BB+ BB+ BBB- BBB- BBB- BBB-

7/29/2019 Nbf p 17264811

39/40


Disclaimer: This material is for information only, and we are not soliciting any action based upon it. This report is not to beconstrued as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer orsolicitation would be illegal. The information herein has been obtained from sources believed to be reliable, but we do notwarrant that it is accurate or complete, and it should not be relied upon as such. Opinion expressed is our current opinion as ofthe date appearing on this material only, and subject to change without notice. It is intended for the use by recipient only andmay not be reproduced or copied/photocopied or duplicated or made available in any form, by any means, or redistributed toothers without written permission of PT Bank Mandiri Tbk. Additional information is available upon request. For furtherinformation please contact: Office of Chief Economist, Ph. (021) 524 5516/5272 or Facs. (021) 521 0430.

INDONESIA CURRENT DATA

2013

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Exchange Rate

End of Period IDR/USD 9393 10900 9390 8978 9069 8990 9023 9146 9189 9400 9433 9467 9581 9589 9608 9594 9658

Average IDR/USD 9354 1167 9462 9021 9059 9071 9020 9251 9175 9320 9442 9451 9505 9565 9599 9620 9634

Monetary Sector

Base money M0, eop IDRtn 379.58 344.69 402.12 518.45 613.49 594.08 578.96 586.03 596.59 604.98 627.36 634.99 657.96 638.87 648.11 647.98 7 04.84

Narrow money M1 IDRtn 450.06 456.79 515.82 605.38 733.99 696.32 683.25 714.25 720.92 749.45 779.41 771.79 772.42 795.51 774.98 801.40

Broa d Money M2 IDRtn 1,649.66 1,883.85 2,141.38 2,469.40 2,877.22 285.49 284.97 291.19 292.72 299.20 305.03 305.48 308.90 312.55 316.77 320.51

Outstanding Loan IDRtn 995.11 1,313.87 1,446.81 1,783.60 2,223.69 218.34 222.77 229.15 234.34 241.17 248.00 249.87 253.92 258.42 261.50 266.10

O ut st an di ng D ep os it I DR tn 1 ,4 59 .4 4 1, 67 3. 82 1 ,9 14 .1 1 2 ,2 08 .7 2 2 ,5 96 .3 3 2 ,5 40 .2 4 2 ,5 67 .3 6 2 ,6 24 .5 1 2 ,6 36 .0 4 2 ,6 97 .1 0 2 , 73 5. 35 2 ,7 38 ,9 26 .0 9 2 ,7 61 ,2 30 2 ,7 99 ,0 56 2 ,8 34 ,5 44 2 ,8 77 ,1 01

Lending rate (working capital) % p.a 13.00 15.22 13.69 12.83 12.16 12.09 12.02 12.01 11.86 11.78 11.79 11.78 11.73 11.70 11.68 11.61

3-month deposit rate, eop % p.a 7.42 11.97 6.85 7.06 6.81 6.68 6.52 6.31 6.00 5.89 5.76 5.67 5.61 5.69 5.66 5.81

Overnight rate, eop % p.a 4.50 9.40 6.24 5.72 4.55 4.02 3.75 3.76 3.76 3.93 4.05 4.06 4.09 4.10 4.18 4.15 4.19

Prices

Headline CPI (2007=100) Index 155.5 113.86 117.03 1 25.17 129.91 130.9 130.96 131.05 131.32 131.41 132.23 133.16 134.43 134.45 134.67 134.76 135.49

Year on year inflation rate % 6.59 11.06 2.78 6.96 3.79 3.65 3.56 3.97 4.50 4.45 4.53 4.56 4.58 4.31 4.61 4.32 4.30

Month on month inflation rate % 1.1 -0.04 0.33 0.92 0.57 0.76 0.05 0.07 0.21 0.07 0.62 0.70 0.95 0.01 0.16 0.07 0.54

Year to date inflation rate % N/A 11.06 2.78 6.96 3.79 0.76 0.81 0.88 1.09 1.15 1.79 2.50 3.48 3.49 3.66 3.73 4.30

Wholesale Price Index (2000=100) Index 217 238.0 167.35 1 77.87 185.76 187.11 187.77 188.54 189.45 189.72 190.22 190.76 191.81 192.11 192.19 192.00 192.06

Trade

Export USDbn 10.86 8.69 13.35 1 6.83 17.20 15.49 15.69 17.25 16.17 16.82 15.44 16.10 14.05 15.89 15.32 16.44

Oil USDbn 2.51 1.24 2.50 3.26 3.60 2.97 3.35 3.48 3.56 3.72 2.89 2.91 2.78 2.77 2.65 2.70

Non oil USDbn 8.36 7.45 10.85 13.57 13.60 12.51 12.33 13.76 12.61 13.11 12.55 13.17 11.26 13.12 12.67 13.73

Import USDbn 6.81 6.29 10.33 13.15 16.34 14.55 14.86 16.32 16.93 17.03 16.72 16.35 13.81 15.34 17.21 16.92

Oil USDbn 2.39 0.98 2.10 2.64 3.63 2.98 3.49 4.00 4.12 3.44 3.35 2.76 3.31 3.44 3.83 4.06

Non oil USDbn 4.42 5.31 8.22 1 0.50 12.71 11.53 11.37 12.31 12.81 13.60 13.37 13.60 10.55 11.90 13.38 12.85

Trade Balance USDbn 4.06 2.40 3.02 3.68 0.86 0.94 0.83 0.93 (0.76) (0.21) (1.28) (0.25) 0.24 0.55 -1.89 -0.48

Output

G DP ( cu rren t p rice ) I DR tn 1034.86 1274.29 1450.82 1670.52 1921.56 1972.35 2050.09 212.28

GDP (constant price at 2000) IDRtn 493.37 518.94 547.54 585.10 623.96 632.77 650.58 671.47

Real Growth % YoY 5.88 5.20 5.43 6.89 6.49 6.32 6.37 6.17

Capital Market

JCI Index, eop Index 2 74 5. 83 1 35 5.4 1 25 34 .3 6 3 70 3. 51 38 21. 99 39 41 .6 9 3 98 5.2 1 4 12 1.5 5 4 18 0. 73 3 832 .82 3 955 .57 4 142 .3 3 4 06 0. 33 4 262 .5 6 4,350.29 4,276.14 4,316.68

Volume, avg shares mn 3 15 5. 65 1 74 3.2 5 34 22 .1 0 3 96 5. 38 34 96. 38 40 45 .4 9 3 48 2.6 0 2 75 1.1 6 4 40 7. 93 3 092 .99 2 936 .69 2 529 .6 6 2 62 4. 87 3 796 .5 5 3,916.49 5,289.28 3,059.99

Value, avg IDRbn 4 34 0. 55 1 45 4.6 1 23 32 .4 2 3 95 9. 30 26 84. 29 32 69 .5 0 4 16 1.3 9 3 77 3.3 0 4 10 3. 34 3 967 .34 3 216 .60 3 347 .2 3 3 06 8. 91 3 518 .6 7 3,623.31 6,734.35 3,868.71

Consumer Confidence Index 99.10 90.60 108.70 109.30 116.60 119.20 111.70 107.30 102.50 109.00 114.40 113.50 115.70 117.70 119.50 120.10 1 16.40

2011Indicators Unit 20102012

2007 2008 2009

7/29/2019 Nbf p 17264811

40/40

nbf p 17264811

Documents