The Jakarta Globe RSS: Business http://www.thejakartaglobe.com 2013 The Jakarta Globe Your City, Your World Fri, 24 Oct 2014 03:54:15 +0000 en-US hourly 1 http://www.thejakartaglobe.com/images/jakarta-globe.gif http://www.thejakartaglobe.com BTPN Dodges Liquidity Squeeze to Book Jan.-Sept. Profit of $116m http://thejakartaglobe.beritasatu.com/?p=339067 Fri, 24 Oct 2014 10:06:52 +0700 Jakarta. Bank Tabungan Pensiunan Nasional, a medium-sized lender, booked a 15 percent increase in net income in the January-September period to Rp 1.4 trillion ($116 million) from the same period last year, as lending rose despite measures to rein in borrowing. The company’s lending grew 13 percent to Rp 51 trillion, the company said in a statement on Thursday. BTPB’s net interest income rose 14 percent to 9.2 trillion, while its net interest cost rose 42 percent to Rp 3.95 trillion. Jerry Ng, BTPN’s president director, was aware of the liquidity squeeze among Indonesian small and medium banks in the past few months and that forced BTPN to focus on “conservative and prudent” measures in expanding lending in order to maintain profit growth. By comparison, profit at other lenders such as Bank Danamon Indonesia and Bank Internasional Indonesia fell in the nine-month period. BTPN’s gross non-performing loan ratio – a measure of unpaid loans to total loans – rose to 0.81 percent from 0.62 percent. Its profitability — as measured by net interest margin or the difference between interest charged to debtors and interest given to depositors — fell to 11.4 percent from 12.9 percent, as the lender had set higher interest to depositors to persuade them in keeping their money at the bank. Investor Daily]]> Jakarta. Bank Tabungan Pensiunan Nasional, a medium-sized lender, booked a 15 percent increase in net income in the January-September period to Rp 1.4 trillion ($116 million) from the same period last year, as lending rose despite measures to rein in borrowing. The company’s lending grew 13 percent to Rp 51 trillion, the company said in a statement on Thursday. BTPB’s net interest income rose 14 percent to 9.2 trillion, while its net interest cost rose 42 percent to Rp 3.95 trillion. Jerry Ng, BTPN’s president director, was aware of the liquidity squeeze among Indonesian small and medium banks in the past few months and that forced BTPN to focus on “conservative and prudent” measures in expanding lending in order to maintain profit growth. By comparison, profit at other lenders such as Bank Danamon Indonesia and Bank Internasional Indonesia fell in the nine-month period. BTPN’s gross non-performing loan ratio – a measure of unpaid loans to total loans – rose to 0.81 percent from 0.62 percent. Its profitability — as measured by net interest margin or the difference between interest charged to debtors and interest given to depositors — fell to 11.4 percent from 12.9 percent, as the lender had set higher interest to depositors to persuade them in keeping their money at the bank. Investor Daily]]> http://thejakartaglobe.beritasatu.com/?p=339067 MPP Opens 102nd Hypermart Store, in Samarinda http://thejakartaglobe.beritasatu.com/?p=339054 Fri, 24 Oct 2014 09:58:08 +0700 Jakarta. Matahari Putra Prima opened its 102nd Hypermart store, in Samarinda, the capital of East Kalimantan, as part of the Indonesian company’s expansion to take advantage of faster economic growth outside Java. The store is MPP’s second in Samarinda, and the ninth in Kalimantan, said Danny Kojongian, Matahari’s communication director. “We are committed to expand outside Java.” The company is reducing the number of new Hypermart stores by half this year to 10, allowing it to focus on developing new store concept. Aside from the Hypermart stores, MPP now has 30 Foodmart supermarket branches and 95 branches of the health and beauty chain Boston Health & Beauty. Ninety-one percent of MPP’s revenue comes from Hypermart, while 8 percent comes from Foodmart and 1 percent from Boston Health & Beauty. Investor Daily]]> Jakarta. Matahari Putra Prima opened its 102nd Hypermart store, in Samarinda, the capital of East Kalimantan, as part of the Indonesian company’s expansion to take advantage of faster economic growth outside Java. The store is MPP’s second in Samarinda, and the ninth in Kalimantan, said Danny Kojongian, Matahari’s communication director. “We are committed to expand outside Java.” The company is reducing the number of new Hypermart stores by half this year to 10, allowing it to focus on developing new store concept. Aside from the Hypermart stores, MPP now has 30 Foodmart supermarket branches and 95 branches of the health and beauty chain Boston Health & Beauty. Ninety-one percent of MPP’s revenue comes from Hypermart, while 8 percent comes from Foodmart and 1 percent from Boston Health & Beauty. Investor Daily]]> http://thejakartaglobe.beritasatu.com/?p=339054 Indonesia’s Benchmark Stock Index Projected to Rise by Year-End: Analysts http://thejakartaglobe.beritasatu.com/?p=338988 Fri, 24 Oct 2014 02:06:11 +0700 Jakarta. Investors can expect to earn a profit from their investments in the stock markets this year as the index is forecast to gain on confidence the new administration under President Joko Widodo will efficiently tackle the soaring subsidy problem, some analysts say. Haryajid Ramelan, chairman of the Indonesian Stock Analysts Association (AAEI), estimates the benchmark stock measure the Jakarta Composite Index to gain by 17 percent this year. The index lost 1 percent to close at 4,274.18 at the end of last year. State-owned stock brokerage firm Bahana Securities added the same positive sentiments, estimating the JCI to rise 24 percent to 5,300 by year-end. According to First Asia Capital research analyst David Sutyanto, consumer, banking, construction and infrastructure stocks are likely to be the most “resistant” against adverse side effects of the government’s plan to raise subsidized fuel prices. Newly inaugurated President Joko Widodo is expected to raise the price of subsidized fuel by an average of Rp 3,000 (25 cents) per liter before the year draws to a close in an effort to clear much-needed fiscal space in the state budget. While the price hike is bound to shake local markets, investors widely agree the long-term benefits of such a move will outlast the short-term, negative effects. “After this month, the market will only react to policies currently being planned by the government, especially on fuel subsidies,” David said. Harry Su, head of research at Bahana Securities, agreed, saying that company data indicates “the market understands that [a cut in the] fuel subsidy is a good thing for the economy, even if the resulting price hike is particularly high.” With the decline of global oil prices, Joko would be well-positioned to raise the price of subsidized fuel, Harry added. “Since the [global] oil price is lower, a Rp 2,000 price hike would be enough to plug the budget deficit,” Harry said.]]> Jakarta. Investors can expect to earn a profit from their investments in the stock markets this year as the index is forecast to gain on confidence the new administration under President Joko Widodo will efficiently tackle the soaring subsidy problem, some analysts say. Haryajid Ramelan, chairman of the Indonesian Stock Analysts Association (AAEI), estimates the benchmark stock measure the Jakarta Composite Index to gain by 17 percent this year. The index lost 1 percent to close at 4,274.18 at the end of last year. State-owned stock brokerage firm Bahana Securities added the same positive sentiments, estimating the JCI to rise 24 percent to 5,300 by year-end. According to First Asia Capital research analyst David Sutyanto, consumer, banking, construction and infrastructure stocks are likely to be the most “resistant” against adverse side effects of the government’s plan to raise subsidized fuel prices. Newly inaugurated President Joko Widodo is expected to raise the price of subsidized fuel by an average of Rp 3,000 (25 cents) per liter before the year draws to a close in an effort to clear much-needed fiscal space in the state budget. While the price hike is bound to shake local markets, investors widely agree the long-term benefits of such a move will outlast the short-term, negative effects. “After this month, the market will only react to policies currently being planned by the government, especially on fuel subsidies,” David said. Harry Su, head of research at Bahana Securities, agreed, saying that company data indicates “the market understands that [a cut in the] fuel subsidy is a good thing for the economy, even if the resulting price hike is particularly high.” With the decline of global oil prices, Joko would be well-positioned to raise the price of subsidized fuel, Harry added. “Since the [global] oil price is lower, a Rp 2,000 price hike would be enough to plug the budget deficit,” Harry said.]]> http://thejakartaglobe.beritasatu.com/?p=338988 Ahok’s Affordable Housing Pledge http://thejakartaglobe.beritasatu.com/news/jakarta/ahoks-affordable-housing-pledge/ Thu, 23 Oct 2014 23:27:09 +0700 Floods and fires have made previously resistant residents more open to relocating, officials say. (Antara Photo/Rivan Awal Lingga) Floods and fires have made previously resistant residents more open to relocating, officials say. (Antara Photo/Rivan Awal Lingga)[/caption] Jakarta. Property developers in Jakarta will be obliged to allocate 20 percent of their property units for low-cost apartments if their construction projects cause people to be evicted from their homes, Jakarta Acting Governor Basuki Tjahaja Purnama said. Basuki said many construction projects on apartment and office towers in Jakarta displace long-time residents from their neighborhoods. In the future, Basuki says he wants Jakarta’s government to ensure displaced people have a place to go by mandating that developers include plans for low-cost apartments that will be available for displaced residents. “In the future we won’t allow such things [evicted residents without substitute housing] to happen again. We will force [developers] to build [low-cost apartments],” the acting governor told reporters at the City Hall on Thursday. Basuki said a similar policy had been introduced before but, in absence of sanctions for offenders, it was not successfully implemented. Many property developers have even begun construction projects before settling disputed land ownership claims. This won’t happen again, Basuki said, adding that property developers will first have to prove their commitment to setting aside 20 percent of their property units for low-cost apartments before any project may commence. He stopped short of mentioning when this new policy will come into effect — or how developers’ commitment will be demonstrated to officials’ satisfaction. The acting governor’s pledge comes as residents in neighborhoods of Jakarta’s “Golden Triangle” — an area bounded by Jalan Sudirman, Jalan HR Rasuna Said and Jalan Gatot Subroto — are expected to be displaced by office towers in the coming years. Many of the neighborhoods are densely settled, and relocating the residents to affordable apartment towers will do them good, Basuki said. “When there is a fire, emergency crewswill be able to easily access the [apartment complexes] and funnel water,” he said as an example of positive changes that the planned policy is expected to bring about. Economically disadvantaged neighborhoods in Jakarta have long been prone to fires and floods due to their density and wooden structures. These incidents are said to becoming more frequent and severe in recent years, prompting many residents, Basuki says, to drop their previous resistance and become willing to relocate. Part of the perceived softening of relocation resistance is attributed to former Jakarta Governor Joko Widodo’s approach to the communities, which involved community dialogues and development of reportedly voluntary affordable housing alternatives to Jakarta’s riparian “vertical villages,” or “ kampungs .”]]> Floods and fires have made previously resistant residents more open to relocating, officials say. (Antara Photo/Rivan Awal Lingga) Floods and fires have made previously resistant residents more open to relocating, officials say. (Antara Photo/Rivan Awal Lingga)[/caption] Jakarta. Property developers in Jakarta will be obliged to allocate 20 percent of their property units for low-cost apartments if their construction projects cause people to be evicted from their homes, Jakarta Acting Governor Basuki Tjahaja Purnama said. Basuki said many construction projects on apartment and office towers in Jakarta displace long-time residents from their neighborhoods. In the future, Basuki says he wants Jakarta’s government to ensure displaced people have a place to go by mandating that developers include plans for low-cost apartments that will be available for displaced residents. “In the future we won’t allow such things [evicted residents without substitute housing] to happen again. We will force [developers] to build [low-cost apartments],” the acting governor told reporters at the City Hall on Thursday. Basuki said a similar policy had been introduced before but, in absence of sanctions for offenders, it was not successfully implemented. Many property developers have even begun construction projects before settling disputed land ownership claims. This won’t happen again, Basuki said, adding that property developers will first have to prove their commitment to setting aside 20 percent of their property units for low-cost apartments before any project may commence. He stopped short of mentioning when this new policy will come into effect — or how developers’ commitment will be demonstrated to officials’ satisfaction. The acting governor’s pledge comes as residents in neighborhoods of Jakarta’s “Golden Triangle” — an area bounded by Jalan Sudirman, Jalan HR Rasuna Said and Jalan Gatot Subroto — are expected to be displaced by office towers in the coming years. Many of the neighborhoods are densely settled, and relocating the residents to affordable apartment towers will do them good, Basuki said. “When there is a fire, emergency crewswill be able to easily access the [apartment complexes] and funnel water,” he said as an example of positive changes that the planned policy is expected to bring about. Economically disadvantaged neighborhoods in Jakarta have long been prone to fires and floods due to their density and wooden structures. These incidents are said to becoming more frequent and severe in recent years, prompting many residents, Basuki says, to drop their previous resistance and become willing to relocate. Part of the perceived softening of relocation resistance is attributed to former Jakarta Governor Joko Widodo’s approach to the communities, which involved community dialogues and development of reportedly voluntary affordable housing alternatives to Jakarta’s riparian “vertical villages,” or “ kampungs .”]]> http://thejakartaglobe.beritasatu.com/news/jakarta/ahoks-affordable-housing-pledge/ Liquidity Squeeze Unevenly Felt by Indonesian Lenders http://thejakartaglobe.beritasatu.com/business/liquidity-squeeze-unevenly-felt-indonesian-lenders/ Fri, 24 Oct 2014 02:02:39 +0700 Jakarta. Indonesia’s smaller lenders felt a profit pinch during the first nine months of the year, while the nation’s bigger lenders were not as affected by growing margin pressures. Officials at Bank Mandiri, the nation’s largest bank by assets, said on Thursday that large banks like itself were able ease pressures and attract cheaper funding from depositors despite tight liquidity conditions and slow economic growth. Net income Mandiri grew 13 percent year-on-year during the January-September period, the lender reported. Bank Mandiri’s net income rose to Rp 14.5 trillion ($1.20 billion) from Rp 12.8 trillion last year, while net interest income — or income from lending money to its customers after subtracting for payments to depositors — increased 26 percent to Rp 45.3 trillion. The lender’s outstanding loans grew 12.4 percent to reach Rp 506.5 trillion as of Sept. 30, while its total third party funds — made of savings, demand deposits and term deposits — rose 14.9 percent to Rp 590.89 trillion. The lender continues to put considerable effort into maintaining reasonably capital reserves despite currently tight liquidity conditions in Indonesia, chief financial officer Pahala Mansury said. As a result, Bank Mandiri still managed to book stronger net interest margins (NIM), a measure of a bank’s profitability. Bank Mandiri’s NIM rose to 5.87 percent from January to September, up from 5.52 percent in the same period last year, while its gross non-performing loans (NPL), or a measure of unhealthy loans, declined to 1.68 percent from 1.71 percent. Analysts have said the high net interest margins are only possible when big banks like Mandiri minimize the cost of funding. Furthermore, large lenders also “have stronger capital,” Andrew Agado, head of research at Recapital Securities, said. This means they are able to expand their loans — a luxury smaller banks don’t have — and typically “have the capability to better control the quality of the loans.” Indonesia’s banks have in recent months been in a heated competition to lure customers — and their money — as the country’s financial markets brace for an increase in US Federal Reserve interest rates next year. When this happens, investors will likely sell their risky but high-yielding assets in emerging markets, including Indonesia, to place their funds in US safe havens, triggering a mass exodus of capital. Indonesian lenders have also struggle d with the impact of slowing economic growth, which can potentially boost their ratio of non-performing loans. State-controlled Bank Rakyat Indonesia, the second largest lender by assets, reported on Wednesday that its net income jumped 18 percent year-on-year to reach Rp 18.1 trillion in the first nine months of this year. That news comes as a surprise, since non-performing loans at BRI rose to 1.89 percent of total loans, from 1.77 percent from last year. BRI disbursed Rp 464.2 trillion in loans, up 12 percent year-on-year, bolstered by a strong growth in micro-lending. The lender also kept its interest cost low, in turn boosting its net interest margins to 8.78 percent from 8.25 percent last year. Two other, smaller lenders were not so lucky. Profit at Bank Internasional Indonesia, a subsidiary of Malaysia’s Malayan Banking, dropped by more than a half in the January-September period from a year earlier, as the lender scraped for funding and set aside more money to cover unpaid loans. BII’s net income fell 53 percent to Rp 372.8 billion ($31 million), the lender said in a statement on Wednesday. Its net interest income rose 4.7 percent to Rp 4.3 trillion from Rp 4.1 trillion. Higher interest costs for deposits and slowed lending growth put pressure on net interest margins, which tumbled 48 basis points to 4.63 percent. BII, the country’s eight-largest lender by assets, showed that its outstanding loans increased 14 percent to Rp 104.6 trillion in the nine-month period from a year earlier. Still, gross non-performing loans rose to 2.55 percent of total loans from 1.74 percent, driving up provision costs 151 percent to Rp 1.4 trillion. Profit at Bank Danamon Indonesia, the country’s sixth-largest lender by assets, also saw falling profits. Its net income declined 30 percent in the first nine months, as a small increase in net interest income wasn’t enough to offset the sharp decline in fee-based operational income. Danamon’s net income dropped to Rp 2.1 trillion ($171 million) in the January-September period, from Rp 3 trillion in the same period last year. It saw minor growth in its net interest income, rising only 1 percent to Rp 10.2 trillion. Danamon’s outstanding loans grew 7 percent to Rp 139 trillion as of September-end, while Danamon’s total third party funds, which includes savings, current account and term-deposits, grew 10 percent to Rp 144 trillion. According to the bank’s financial statement, the challenging period eroded Danamon’s profit margins. The net interest margin — a measure of banks’ profitability for lending to customers — declined to 8.4 percent from 9.8 percent. Meanwhile, Danamon’s gross non-performing loan (NPL) ratio increased to 2.4 percent of its overall lending from a previous 2.2 percent.]]> Jakarta. Indonesia’s smaller lenders felt a profit pinch during the first nine months of the year, while the nation’s bigger lenders were not as affected by growing margin pressures. Officials at Bank Mandiri, the nation’s largest bank by assets, said on Thursday that large banks like itself were able ease pressures and attract cheaper funding from depositors despite tight liquidity conditions and slow economic growth. Net income Mandiri grew 13 percent year-on-year during the January-September period, the lender reported. Bank Mandiri’s net income rose to Rp 14.5 trillion ($1.20 billion) from Rp 12.8 trillion last year, while net interest income — or income from lending money to its customers after subtracting for payments to depositors — increased 26 percent to Rp 45.3 trillion. The lender’s outstanding loans grew 12.4 percent to reach Rp 506.5 trillion as of Sept. 30, while its total third party funds — made of savings, demand deposits and term deposits — rose 14.9 percent to Rp 590.89 trillion. The lender continues to put considerable effort into maintaining reasonably capital reserves despite currently tight liquidity conditions in Indonesia, chief financial officer Pahala Mansury said. As a result, Bank Mandiri still managed to book stronger net interest margins (NIM), a measure of a bank’s profitability. Bank Mandiri’s NIM rose to 5.87 percent from January to September, up from 5.52 percent in the same period last year, while its gross non-performing loans (NPL), or a measure of unhealthy loans, declined to 1.68 percent from 1.71 percent. Analysts have said the high net interest margins are only possible when big banks like Mandiri minimize the cost of funding. Furthermore, large lenders also “have stronger capital,” Andrew Agado, head of research at Recapital Securities, said. This means they are able to expand their loans — a luxury smaller banks don’t have — and typically “have the capability to better control the quality of the loans.” Indonesia’s banks have in recent months been in a heated competition to lure customers — and their money — as the country’s financial markets brace for an increase in US Federal Reserve interest rates next year. When this happens, investors will likely sell their risky but high-yielding assets in emerging markets, including Indonesia, to place their funds in US safe havens, triggering a mass exodus of capital. Indonesian lenders have also struggle d with the impact of slowing economic growth, which can potentially boost their ratio of non-performing loans. State-controlled Bank Rakyat Indonesia, the second largest lender by assets, reported on Wednesday that its net income jumped 18 percent year-on-year to reach Rp 18.1 trillion in the first nine months of this year. That news comes as a surprise, since non-performing loans at BRI rose to 1.89 percent of total loans, from 1.77 percent from last year. BRI disbursed Rp 464.2 trillion in loans, up 12 percent year-on-year, bolstered by a strong growth in micro-lending. The lender also kept its interest cost low, in turn boosting its net interest margins to 8.78 percent from 8.25 percent last year. Two other, smaller lenders were not so lucky. Profit at Bank Internasional Indonesia, a subsidiary of Malaysia’s Malayan Banking, dropped by more than a half in the January-September period from a year earlier, as the lender scraped for funding and set aside more money to cover unpaid loans. BII’s net income fell 53 percent to Rp 372.8 billion ($31 million), the lender said in a statement on Wednesday. Its net interest income rose 4.7 percent to Rp 4.3 trillion from Rp 4.1 trillion. Higher interest costs for deposits and slowed lending growth put pressure on net interest margins, which tumbled 48 basis points to 4.63 percent. BII, the country’s eight-largest lender by assets, showed that its outstanding loans increased 14 percent to Rp 104.6 trillion in the nine-month period from a year earlier. Still, gross non-performing loans rose to 2.55 percent of total loans from 1.74 percent, driving up provision costs 151 percent to Rp 1.4 trillion. Profit at Bank Danamon Indonesia, the country’s sixth-largest lender by assets, also saw falling profits. Its net income declined 30 percent in the first nine months, as a small increase in net interest income wasn’t enough to offset the sharp decline in fee-based operational income. Danamon’s net income dropped to Rp 2.1 trillion ($171 million) in the January-September period, from Rp 3 trillion in the same period last year. It saw minor growth in its net interest income, rising only 1 percent to Rp 10.2 trillion. Danamon’s outstanding loans grew 7 percent to Rp 139 trillion as of September-end, while Danamon’s total third party funds, which includes savings, current account and term-deposits, grew 10 percent to Rp 144 trillion. According to the bank’s financial statement, the challenging period eroded Danamon’s profit margins. The net interest margin — a measure of banks’ profitability for lending to customers — declined to 8.4 percent from 9.8 percent. Meanwhile, Danamon’s gross non-performing loan (NPL) ratio increased to 2.4 percent of its overall lending from a previous 2.2 percent.]]> http://thejakartaglobe.beritasatu.com/business/liquidity-squeeze-unevenly-felt-indonesian-lenders/ No Easy Options for Russia’s Central Bank to Halt Ruble Slide http://thejakartaglobe.beritasatu.com/?p=338912 Fri, 24 Oct 2014 00:16:01 +0700 Moscow. Pressure is growing on Russia’s central bank to adopt more radical measures to defend the tumbling ruble, such as interest rate rises, but there is no easy fix. The bank’s board meets on Oct. 31 to discuss monetary policy and there is growing speculation it may soon raise rates to support the ruble, which is being hit by plunging oil prices and Western sanctions imposed over the Ukraine crisis. The bank says it is also weighing other measures, including long-term dollar loans to banks, as it tries to restore calm to markets. The ruble has lost more than 16 percent of its value against the dollar over the last three months, and the central bank has spent over $15 billion of its foreign reserves to defend it. While there is little sign that the fall is causing public panic, the central bank’s goal of reducing inflation to 4.5 percent next year — from around 8 percent at present — means it cannot ignore the ruble’s slump, which is pushing up import prices. And if the currency’s decline gains momentum as some predict, it could yet cause wider financial instability such as runs on bank deposits. “There’s a real danger that this becomes a self-fulfilling currency crisis if we’re not careful,” said Neil Shearing, chief emerging market economist at Capital Economics in London. With the Russian economy teetering on the verge of recession, the central bank will be reluctant to raise interest rates. However, the bank’s deputy chairman said on Wednesday that the bank would have to “seriously” think about rate increases if the current situation continues — something the IMF has urged Russia to do to achor inflation expectations. “At the moment they are not winning the battle. They need to do it the old fashioned way, that is increase rates by 150-200 basis points,” said Michel Danechi, portfolio manager at EI Sturdza Strategic Emerging Europe Fund. Any decision to raise rates would not be taken lightly. The bank has already increased its benchmark rate three times this year, by a cumulative 250 basis points to 8 percent, and there are doubts about how effective even higher interest rates would be in encouraging investors to hold rubles. Sceptics said foreign inflows have largely been deterred by Western sanctions, while many Russian outflows are linked to debts that must be repaid in any case. Russian companies have around $140 billion in foreign debt repayments by the end of 2015, a major factor behind the ruble’s weakness. Early float? Other analysts urge the bank to bring forward floating the ruble, planned for the end of this year, to provide more flexible options to manage the exchange rate. So far the central bank has been sticking to its existing framework, under which it keeps the ruble inside a floating band against a dollar-euro basket, intervening when it reaches the edge of a nine-ruble-wide corridor. The result has been to slow the ruble’s fall — at the cost so far this month of around $15 billion in foreign exchange reserves — while doing nothing to stop the underlying selling pressure. It may actually be making matters worse, as the predictable nature of the bank’s moves is encouraging one-way bets against the ruble. “The central bank is defending the exchange rate while giving everyone the opportunity to get into the trade [against the ruble]. This is creating additional speculative pressure,” said Alexey Pogorelov, Russia economist at Credit Suisse. A more effective policy, critics say, would be to scrap the corridor but make periodic interventions. That way, the bank could punish speculators by springing occasional surprises. But not everyone agrees that floating the ruble ahead of schedule would make matters better — especially as the immediate consequence could be a further large fall. “What the central bank is trying to avoid is a very abrupt adjustment in the ruble,” said Shearing. “History would suggest that [a floating currency] plunges much further than it otherwise would have done — it overshoots in other words.” Double whammy Ultimately, neither higher interest rates nor a more flexible intervention policy can address the underlying problems that are battering both the ruble and the Russian economy. The root problem is a hole in the balance of payments, caused by the double whammy of falling oil prices and a freeze on foreign investment linked to Western sanctions. Estimates of the size of this hole vary, depending on forecasts for oil prices, the ruble, the easing of sanctions, and Russian companies’ ability to boost sales. Pogorelov at Credit Suisse predicts a $30 billion gap between Russia’s foreign exchange earnings and outflows in 2015. Shearing from Capital Economics sees a $130-140 billion shortfall over the next 12 months. Whatever the true figure, many analysts expect the central bank will have to keep dipping heavily into its $440 billion in reserves even after the ruble is allowed to float. A recent scheme to provide up to $50 billion to banks through repo loans is seen as a step in the right direction. Yet it has done little to calm markets. One problem is that the instruments on offer, with maturities of seven or 28 days, do not address the need for long-term finance. The central bank has said that it is considering much longer-term measures requested by banks, including repo loans of up to three years. But while its foreign exchange reserves are ample enough, the bank appears reluctant to use them to bail out banks, which would raise questions about how safely they are being invested. “The risk is that the [borrowing] bank won’t be able to redeem — this is potential pressure on the central bank reserves,” said Natalia Orlova, chief economist at Alfa Bank. “If the reserves are used by banks then the market will consider that this money is no longer available for [ruble] support, which could potentially translate into more pressure on the currency.” Reuters]]> Moscow. Pressure is growing on Russia’s central bank to adopt more radical measures to defend the tumbling ruble, such as interest rate rises, but there is no easy fix. The bank’s board meets on Oct. 31 to discuss monetary policy and there is growing speculation it may soon raise rates to support the ruble, which is being hit by plunging oil prices and Western sanctions imposed over the Ukraine crisis. The bank says it is also weighing other measures, including long-term dollar loans to banks, as it tries to restore calm to markets. The ruble has lost more than 16 percent of its value against the dollar over the last three months, and the central bank has spent over $15 billion of its foreign reserves to defend it. While there is little sign that the fall is causing public panic, the central bank’s goal of reducing inflation to 4.5 percent next year — from around 8 percent at present — means it cannot ignore the ruble’s slump, which is pushing up import prices. And if the currency’s decline gains momentum as some predict, it could yet cause wider financial instability such as runs on bank deposits. “There’s a real danger that this becomes a self-fulfilling currency crisis if we’re not careful,” said Neil Shearing, chief emerging market economist at Capital Economics in London. With the Russian economy teetering on the verge of recession, the central bank will be reluctant to raise interest rates. However, the bank’s deputy chairman said on Wednesday that the bank would have to “seriously” think about rate increases if the current situation continues — something the IMF has urged Russia to do to achor inflation expectations. “At the moment they are not winning the battle. They need to do it the old fashioned way, that is increase rates by 150-200 basis points,” said Michel Danechi, portfolio manager at EI Sturdza Strategic Emerging Europe Fund. Any decision to raise rates would not be taken lightly. The bank has already increased its benchmark rate three times this year, by a cumulative 250 basis points to 8 percent, and there are doubts about how effective even higher interest rates would be in encouraging investors to hold rubles. Sceptics said foreign inflows have largely been deterred by Western sanctions, while many Russian outflows are linked to debts that must be repaid in any case. Russian companies have around $140 billion in foreign debt repayments by the end of 2015, a major factor behind the ruble’s weakness. Early float? Other analysts urge the bank to bring forward floating the ruble, planned for the end of this year, to provide more flexible options to manage the exchange rate. So far the central bank has been sticking to its existing framework, under which it keeps the ruble inside a floating band against a dollar-euro basket, intervening when it reaches the edge of a nine-ruble-wide corridor. The result has been to slow the ruble’s fall — at the cost so far this month of around $15 billion in foreign exchange reserves — while doing nothing to stop the underlying selling pressure. It may actually be making matters worse, as the predictable nature of the bank’s moves is encouraging one-way bets against the ruble. “The central bank is defending the exchange rate while giving everyone the opportunity to get into the trade [against the ruble]. This is creating additional speculative pressure,” said Alexey Pogorelov, Russia economist at Credit Suisse. A more effective policy, critics say, would be to scrap the corridor but make periodic interventions. That way, the bank could punish speculators by springing occasional surprises. But not everyone agrees that floating the ruble ahead of schedule would make matters better — especially as the immediate consequence could be a further large fall. “What the central bank is trying to avoid is a very abrupt adjustment in the ruble,” said Shearing. “History would suggest that [a floating currency] plunges much further than it otherwise would have done — it overshoots in other words.” Double whammy Ultimately, neither higher interest rates nor a more flexible intervention policy can address the underlying problems that are battering both the ruble and the Russian economy. The root problem is a hole in the balance of payments, caused by the double whammy of falling oil prices and a freeze on foreign investment linked to Western sanctions. Estimates of the size of this hole vary, depending on forecasts for oil prices, the ruble, the easing of sanctions, and Russian companies’ ability to boost sales. Pogorelov at Credit Suisse predicts a $30 billion gap between Russia’s foreign exchange earnings and outflows in 2015. Shearing from Capital Economics sees a $130-140 billion shortfall over the next 12 months. Whatever the true figure, many analysts expect the central bank will have to keep dipping heavily into its $440 billion in reserves even after the ruble is allowed to float. A recent scheme to provide up to $50 billion to banks through repo loans is seen as a step in the right direction. Yet it has done little to calm markets. One problem is that the instruments on offer, with maturities of seven or 28 days, do not address the need for long-term finance. The central bank has said that it is considering much longer-term measures requested by banks, including repo loans of up to three years. But while its foreign exchange reserves are ample enough, the bank appears reluctant to use them to bail out banks, which would raise questions about how safely they are being invested. “The risk is that the [borrowing] bank won’t be able to redeem — this is potential pressure on the central bank reserves,” said Natalia Orlova, chief economist at Alfa Bank. “If the reserves are used by banks then the market will consider that this money is no longer available for [ruble] support, which could potentially translate into more pressure on the currency.” Reuters]]> http://thejakartaglobe.beritasatu.com/?p=338912 Saratoga Aims to Raise $60m in Bond Sale http://thejakartaglobe.beritasatu.com/?p=338906 Thu, 23 Oct 2014 21:12:32 +0700 Sandiaga Uno, chief of shareholder PT Saratoga Investama Sedaya, gestures during an interview at his office in Jakarta April 5, 2013. Indonesian airline PT Mandala Airlines aims to buy 18 Airbus A320 planes worth $1.6 billion by 2014, in an effort to capture growing middle class travel in Southeast Asia's largest economy, a shareholder said on Friday. REUTERS/Beawiharta (INDONESIA - Tags: BUSINESS TRANSPORT) Sandiaga Uno, co-founder of Saratoga Investama Sedaya, gestures during an interview at his office in this file photo. (REUTERS/Beawiharta)[/caption] Jakarta. Saratoga Investama Sedaya, an investment company co-founded by businessman Sandiaga Uno, plans to sell Rp 725 billion ($60 million) medium-term notes to help refinance its debts. “All the funds will be used to repay loans to DBS Bank,” Saratoga said in a statement on Thursday, adding that DBS Vickers Securities was appointed as underwriter for the debt papers. Saratoga signed a $40 million deal with DBS Bank in February this year to help finance its acquisition of Kendall Court Resource Investments, a unit of Singapore-based funds manager Kendall Court. Saratoga withdrew $17.5 million from the loan commitment in April. Earlier this month, Saratoga exercised its call option to buy an 80 percent stake in mining company Trimirta Karya Jaya  worth Rp 275 billion. Saratoga expanded its business reach into the retail sector buy acquiring a 5.83 percent stake in Gilang Agung Persada, the local operator of global high-end fashion and lifestyle brands, including Guess, La Senza, Celine, Givenchy, Banana Republic, Swarovski and Swiss Army. The transaction was worth Rp $5.16 million. Saratoga, which also controls shares of automotive company Mitra Pinasthika Mustika, booked Rp 542 billion in profit during the first half of this year, up 242 percent from the same period in 2013, due largely to rising revenue from its investments. The company’s shares rose 0.96 percent to Rp 5,250 on Thursday.]]> Sandiaga Uno, chief of shareholder PT Saratoga Investama Sedaya, gestures during an interview at his office in Jakarta April 5, 2013. Indonesian airline PT Mandala Airlines aims to buy 18 Airbus A320 planes worth $1.6 billion by 2014, in an effort to capture growing middle class travel in Southeast Asia's largest economy, a shareholder said on Friday. REUTERS/Beawiharta (INDONESIA - Tags: BUSINESS TRANSPORT) Sandiaga Uno, co-founder of Saratoga Investama Sedaya, gestures during an interview at his office in this file photo. (REUTERS/Beawiharta)[/caption] Jakarta. Saratoga Investama Sedaya, an investment company co-founded by businessman Sandiaga Uno, plans to sell Rp 725 billion ($60 million) medium-term notes to help refinance its debts. “All the funds will be used to repay loans to DBS Bank,” Saratoga said in a statement on Thursday, adding that DBS Vickers Securities was appointed as underwriter for the debt papers. Saratoga signed a $40 million deal with DBS Bank in February this year to help finance its acquisition of Kendall Court Resource Investments, a unit of Singapore-based funds manager Kendall Court. Saratoga withdrew $17.5 million from the loan commitment in April. Earlier this month, Saratoga exercised its call option to buy an 80 percent stake in mining company Trimirta Karya Jaya  worth Rp 275 billion. Saratoga expanded its business reach into the retail sector buy acquiring a 5.83 percent stake in Gilang Agung Persada, the local operator of global high-end fashion and lifestyle brands, including Guess, La Senza, Celine, Givenchy, Banana Republic, Swarovski and Swiss Army. The transaction was worth Rp $5.16 million. Saratoga, which also controls shares of automotive company Mitra Pinasthika Mustika, booked Rp 542 billion in profit during the first half of this year, up 242 percent from the same period in 2013, due largely to rising revenue from its investments. The company’s shares rose 0.96 percent to Rp 5,250 on Thursday.]]> http://thejakartaglobe.beritasatu.com/?p=338906 China Analysts Doubtful Despite PMI Rise http://thejakartaglobe.beritasatu.com/business/china-analysts-doubtful-despite-pmi-rise/ Thu, 23 Oct 2014 23:41:56 +0700 Beijing. China’s vast factory sector grew a shade faster in October as firms attracted more foreign and domestic orders, a private survey showed, though analysts said the figure does not point to a fourth-quarter turnaround for the cooling economy. The flash HSBC/Markit manufacturing purchasing managers’ index (PMI) edged up to a three-month high of 50.4 from a final reading of 50.2 in September, and just a hair’s breadth from the 50.3 reading forecast by analysts. However, while the headline number looked slightly better, manufacturing activity in the country remained subdued and details pointed to continued weakness on a number of fronts. Growth in new orders at home and abroad slowed in October and producer prices fell, pushing factory inflation to a seven-month low and highlighting still-soft domestic demand. The level of output in factories also fell to a five-month low of 50.7, just above the 50-point level that separates growth from contraction on a monthly basis. “The sub-indices do not show good momentum,” said Shuang Ding, an economist at Citi in Hong Kong. “Both the production sub-index and the new order sub-index dropped. Those are more relevant in terms of industry production and forward-looking activity.” Ding cautioned that final HSBC/Markit PMI readings have come in lower than the initial flash reading in recent months. China’s economy appears likely to miss the government’s 7.5 percent growth target this year and hit a trough not seen since 1990. Third-quarter growth of 7.3 percent reported on Tuesday was the weakest since the global financial crisis. Most analysts believe authorities will continue to roll out modest support measures in coming months to bolster activity, but they are divided over whether policymakers will take more aggressive action on the matter, such as across-the-board interest rate cuts unless conditions threaten to sharply deteriorate. “While the manufacturing sector likely stabilized in October, the economy continues to show signs of insufficient effective demand,” said Hongbin Qu, chief economist for China at HSBC. “This warrants further policy easing and we expect more easing measures on both the monetary as well as fiscal fronts in the months ahead,” Qu added. Economists at ANZ, who maintained their full-year growth forecast of 7.2 percent, have a stronger view. “With domestic demand remaining soft and disinflationary risks on the rise, we maintain our forecast of two, 25-basis-point cuts in benchmark market interest rates, one in the fourth quarter of 2014 and one in the first quarter of 2015,” the economists said in a note, arguing that such a move was needed to bring financing costs down more forcefully. A sagging housing market, sluggish domestic demand and erratic exports have dampened Chinese activity this year. While exports have recently shown signs of picking up, the property market and investment continue to cool and many companies are being pinched by tighter credit. Weak inflation and capacity utilization also point to an economy that still has far too much excess capacity. Indeed, Reuters data showed that Chinese companies have frozen expansion plans and cut their investment by the most since the global crisis as they hunker down for more austere days ahead. For Beijing, employment is key Chinese officials have indicated they would be willing to tolerate slightly slower growth as long as the jobs market continues to hold up, which would argue against the need for the central bank to take more forceful measures such as rate cuts. Keeping the labor market healthy is a top policy priority for Chinese leaders, who fear that widespread unemployment could stir social unrest. The flash PMI employment sub-index, although still indicating a contraction for the 11th straight month, posted a substantial improvement that was largely responsible for the higher headline figure, said Julian Evans-Pritchard, an economist at Capital Economics. “The breakdown suggests that although healthy export demand continues to support the manufacturing sector, cooling domestic demand remains a drag,” Evans-Pritchard said. “Nonetheless, we think that healthy employment and wage growth, along with concerns over mounting credit risks, mean that policymakers will avoid rolling out significant stimulus in response to the continued slowdown.” There have been no reports of major layoffs, although some firms, particularly state-owned companies, may be reluctant to be seen shedding staff. The HSBC survey tends to focus more on small and mid-sized companies. Bottoming out While growth is unlikely to accelerate in the fourth quarter, the flash PMI indicates it may at least be leveling off, some analysts have said. “If the flash PMI is right, then October is going to be almost the same as September, slightly better — that would be industrial production growth of about 8 percent — which suggests that at least it’s not getting worse, that growth has stabilized at this quite subdued level,” said Louis Kuijs, chief China economist at Royal Bank of Scotland in Hong Kong. Japan shows signs of life Japan, which also has been battling weak consumer demand, also showed stronger signs of activity in October. Factory activity grew at its fastest rate in seven months and the pace of both domestic and export orders picked up in an encouraging sign that the economy may finally be recovering from an April sales tax hike. If confirmed by official data, signs of recovery from a sharp second-quarter slump would be welcome news for the government as it prepares to decide by year-end on whether to proceed with a second tax increase. The IMF on Thursday urged the government to go ahead with the second hike in order to maintain its fiscal credibility, though some top advisers have said it should be delayed because the economy may still be too fragile. Reuters]]> Beijing. China’s vast factory sector grew a shade faster in October as firms attracted more foreign and domestic orders, a private survey showed, though analysts said the figure does not point to a fourth-quarter turnaround for the cooling economy. The flash HSBC/Markit manufacturing purchasing managers’ index (PMI) edged up to a three-month high of 50.4 from a final reading of 50.2 in September, and just a hair’s breadth from the 50.3 reading forecast by analysts. However, while the headline number looked slightly better, manufacturing activity in the country remained subdued and details pointed to continued weakness on a number of fronts. Growth in new orders at home and abroad slowed in October and producer prices fell, pushing factory inflation to a seven-month low and highlighting still-soft domestic demand. The level of output in factories also fell to a five-month low of 50.7, just above the 50-point level that separates growth from contraction on a monthly basis. “The sub-indices do not show good momentum,” said Shuang Ding, an economist at Citi in Hong Kong. “Both the production sub-index and the new order sub-index dropped. Those are more relevant in terms of industry production and forward-looking activity.” Ding cautioned that final HSBC/Markit PMI readings have come in lower than the initial flash reading in recent months. China’s economy appears likely to miss the government’s 7.5 percent growth target this year and hit a trough not seen since 1990. Third-quarter growth of 7.3 percent reported on Tuesday was the weakest since the global financial crisis. Most analysts believe authorities will continue to roll out modest support measures in coming months to bolster activity, but they are divided over whether policymakers will take more aggressive action on the matter, such as across-the-board interest rate cuts unless conditions threaten to sharply deteriorate. “While the manufacturing sector likely stabilized in October, the economy continues to show signs of insufficient effective demand,” said Hongbin Qu, chief economist for China at HSBC. “This warrants further policy easing and we expect more easing measures on both the monetary as well as fiscal fronts in the months ahead,” Qu added. Economists at ANZ, who maintained their full-year growth forecast of 7.2 percent, have a stronger view. “With domestic demand remaining soft and disinflationary risks on the rise, we maintain our forecast of two, 25-basis-point cuts in benchmark market interest rates, one in the fourth quarter of 2014 and one in the first quarter of 2015,” the economists said in a note, arguing that such a move was needed to bring financing costs down more forcefully. A sagging housing market, sluggish domestic demand and erratic exports have dampened Chinese activity this year. While exports have recently shown signs of picking up, the property market and investment continue to cool and many companies are being pinched by tighter credit. Weak inflation and capacity utilization also point to an economy that still has far too much excess capacity. Indeed, Reuters data showed that Chinese companies have frozen expansion plans and cut their investment by the most since the global crisis as they hunker down for more austere days ahead. For Beijing, employment is key Chinese officials have indicated they would be willing to tolerate slightly slower growth as long as the jobs market continues to hold up, which would argue against the need for the central bank to take more forceful measures such as rate cuts. Keeping the labor market healthy is a top policy priority for Chinese leaders, who fear that widespread unemployment could stir social unrest. The flash PMI employment sub-index, although still indicating a contraction for the 11th straight month, posted a substantial improvement that was largely responsible for the higher headline figure, said Julian Evans-Pritchard, an economist at Capital Economics. “The breakdown suggests that although healthy export demand continues to support the manufacturing sector, cooling domestic demand remains a drag,” Evans-Pritchard said. “Nonetheless, we think that healthy employment and wage growth, along with concerns over mounting credit risks, mean that policymakers will avoid rolling out significant stimulus in response to the continued slowdown.” There have been no reports of major layoffs, although some firms, particularly state-owned companies, may be reluctant to be seen shedding staff. The HSBC survey tends to focus more on small and mid-sized companies. Bottoming out While growth is unlikely to accelerate in the fourth quarter, the flash PMI indicates it may at least be leveling off, some analysts have said. “If the flash PMI is right, then October is going to be almost the same as September, slightly better — that would be industrial production growth of about 8 percent — which suggests that at least it’s not getting worse, that growth has stabilized at this quite subdued level,” said Louis Kuijs, chief China economist at Royal Bank of Scotland in Hong Kong. Japan shows signs of life Japan, which also has been battling weak consumer demand, also showed stronger signs of activity in October. Factory activity grew at its fastest rate in seven months and the pace of both domestic and export orders picked up in an encouraging sign that the economy may finally be recovering from an April sales tax hike. If confirmed by official data, signs of recovery from a sharp second-quarter slump would be welcome news for the government as it prepares to decide by year-end on whether to proceed with a second tax increase. The IMF on Thursday urged the government to go ahead with the second hike in order to maintain its fiscal credibility, though some top advisers have said it should be delayed because the economy may still be too fragile. Reuters]]> http://thejakartaglobe.beritasatu.com/business/china-analysts-doubtful-despite-pmi-rise/ Tunas Baru’s Capital Pot $23m Sweeter By Stake Sale http://thejakartaglobe.beritasatu.com/?p=338887 Thu, 23 Oct 2014 20:57:55 +0700 Jakarta. Agricultural-based consumer goods producer Tunas Baru Lampung has announced plans to raise Rp 286 billion ($23.7 million) to beef up the company’s capital. Tunas Baru intends to sell 400 million stocks at Rp 715 each through private placement, selling new shares to specific investors as opposed to existing share holders, the company said in a prospectus published in Investor Daily on Thursday. The plan is yet to be approved by extraordinary shareholders, who are scheduled to meet on Nov. 7, 2014. Tunas Baru plans to use the proceeds fund its business expansion. Following the sale, shareholders’ stake in the company will be diluted by 7.49 percent. Tunas Baru Lampung is the agricultural unit of business conglomerate Sungai Budi whose founder, Widarto, is one of the richest people in Indonesia, according to Globe Asia magazine’s rich list. The Jakarta-based company announced in July it had set aside $103 million to build a new sugar mill. The company currently operates a similar manufacturing facility in Lampung, which has a production capacity of 125,000 tons of sugar per year, according to its website. Established in 1973, Tunas Baru —  through multiple subsidiaries — is engaged in the manufacturing and distribution of agricultural-based consumer products such as cooking oil, palm oil, coconut oil and sugar. Shares of the company rose 2.2 percent to trade at 685 at the Indonesia Stock Exchange (IDX) on Thursday, in line with 0.6 percent gain in the benchmark index. Tunas Baru operates oil and sugar refineries in Lampung, Palembang and Surabaya. The company also owns palm oil and sugar cane plantations in those cities, as well as in Pontianak, West Kalimantan. Tunas Baru sold roughly Rp 2.7 trillion worth of consumer goods in the first half this year, 28 percent of which were reserved for exports.]]> Jakarta. Agricultural-based consumer goods producer Tunas Baru Lampung has announced plans to raise Rp 286 billion ($23.7 million) to beef up the company’s capital. Tunas Baru intends to sell 400 million stocks at Rp 715 each through private placement, selling new shares to specific investors as opposed to existing share holders, the company said in a prospectus published in Investor Daily on Thursday. The plan is yet to be approved by extraordinary shareholders, who are scheduled to meet on Nov. 7, 2014. Tunas Baru plans to use the proceeds fund its business expansion. Following the sale, shareholders’ stake in the company will be diluted by 7.49 percent. Tunas Baru Lampung is the agricultural unit of business conglomerate Sungai Budi whose founder, Widarto, is one of the richest people in Indonesia, according to Globe Asia magazine’s rich list. The Jakarta-based company announced in July it had set aside $103 million to build a new sugar mill. The company currently operates a similar manufacturing facility in Lampung, which has a production capacity of 125,000 tons of sugar per year, according to its website. Established in 1973, Tunas Baru —  through multiple subsidiaries — is engaged in the manufacturing and distribution of agricultural-based consumer products such as cooking oil, palm oil, coconut oil and sugar. Shares of the company rose 2.2 percent to trade at 685 at the Indonesia Stock Exchange (IDX) on Thursday, in line with 0.6 percent gain in the benchmark index. Tunas Baru operates oil and sugar refineries in Lampung, Palembang and Surabaya. The company also owns palm oil and sugar cane plantations in those cities, as well as in Pontianak, West Kalimantan. Tunas Baru sold roughly Rp 2.7 trillion worth of consumer goods in the first half this year, 28 percent of which were reserved for exports.]]> http://thejakartaglobe.beritasatu.com/?p=338887