Economy, Trade and Business II

[bahar]

Calpers adds Indonesia to approved list of markets

JAKARTA (Bloomberg): The California Public Employees' Retirement System, the largest U.S. pension fund, has added Indonesia to the list of countries in which its fund managers may invest because of improved political stability in the Southeast Asian nation.

Indonesian stocks surged to a record.

The country is one of 19 emerging markets approved by Calpers, which manages assets valued at more than US$200 billion. The others are Argentina, Brazil, Chile, the Czech Republic, Hungary, India, Israel, Jordan, Malaysia, Mexico, Peru, the Philippines,Poland, South Africa, South Korea, Taiwan, Thailand and Turkey.

Overseas fund managers are boosting investment after Susilo Bambang Yudhoyono became Indonesia's first directly elected president in October 2004, six years after former President Soeharto was thrown out of office after a 32-year reign.

Yudhoyono was elected after he pledged to reduce corruption, boost economic growth and reduce poverty. The nation's benchmark stock index has risen 67 percent in U.S. dollar terms since Yudhoyono took office.

Calpers' move "reflects foreign investors' confidence in Indonesian assets," said Bambang Setiadi, who helps manage about $220 million at PT Sinar Mas Sekuritas in Jakarta. "Investment climate in terms of the economy and politics is improving."

Calpers, which periodically reviews the markets it plans to invest in, grades countries based on political stability, transparency, and productive labor practices. It also rates liquidity and volatility, regulation, ease of access, and settlement efficiency and transaction costs, before investing.

"Under our emerging markets policy, we have seen significantly improved scores compared with five years ago, showing that these countries are taking steps to support institutional investment," Rob Feckner, president of Calpers board of administration, said in a statement on the Sacramento-based fund's Web site published Monday.

Indonesia's political stability rating, for civil liberties, improved, helping raise the nation's score to 2.0 in 2006 from 1.92 in 2005. The fund invests in countries with a minimum score of 2. Sri Lanka's score slipped from 2.0 in 2005 to 1.8 in 2006.

Calpers doesn't invest in China, Colombia, Egypt, Morocco, Pakistan, Russia, and Venezuela.

"Global money needs place to park," said Kennyarso Soejatman, who helps manage about $45 million at First State Investments in Jakarta.

"Indonesia's move to boost fuel prices in October is seen as good policy. Now there's expectation inflation will slow, and the interest rate will decline. With that, there will be re-rating of Indonesian stocks." (***)

[Alvin]

Indonesia car firms pray for rate cuts as sales slump
Tue Apr 18, 2006 10:35 AM BST
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By Harry Suhartono

JAKARTA (Reuters) - Vehicle sales in Indonesia could slump by more than a quarter this year, threatening jobs in Southeast Asia's biggest economy, after the government more than doubled fuel prices late last year, industry executives say.

Unit sales fell short of 80,000 in the first quarter, nearly 45 percent down on a year earlier, and some in the sector say total 2006 sales will be below 400,000.

Sales of cars and trucks in the world's fourth most populous nation hit a record 533,910 units last year as consumers snapped up motorbikes and vehicles with the help of low interest rates.

But, in October, the government hiked domestic fuel prices to ease pressure on its budget due to a ballooning fuel subsidy bill caused by soaring world oil prices. That move helped push up inflation to a six-year peak and drove up interest rates, curbing enthusiasm for car loans that had fuelled the market.

Firms have trimmed factory output and reduced overtime, which could lead to job cuts, although this would not be industry-wide.

Tony Supatra, general marketing and planning manager at PT Toyota Astra Motor, said that unless interest rates fall sharply, sales this year are likely to fall to below 400,000 units -- sending the industry back nearly two years.

Sales in 2004 were 483,295 units, up from 354,333 in 2003.

"My rough calculation shows (400,000 units) is not something that can be achieved easily, unless there's something extraordinary that can lift sales substantially," Supatra told Reuters.

LOWER RATES, GIVEAWAYS

With global crude prices near $70 a barrel, fuel prices are unlikely to offer drivers or auto makers much near-term respite, and interest rates are not expected to fall back enough to spur consumer buying, even though Indonesia's consumer price index showed its smallest annual rise last month, of 15.74 percent, since fuel prices were hiked in October.

The central bank has said it might cut its reference rate, known as the BI rate (BIPG), sooner than expected, but industry executives said a likely 25 basis point cut would do little to improve sales. The BI rate is currently 12.75 percent.

"Unless they said interest has been cut to 5 percent ... that will be an entirely different story," Toyota's Supatra said.

Jonfis Fandy, in charge of marketing and sales at PT Honda Prospect Motor, which distributes Honda Motor Co. vehicles in Indonesia, said: "Lower interest rates are always good for us, but the question is whether the leasing companies can quickly adapt to a new rate."

To try and spur demand, some auto makers are offering low interest rate financing, sharing the burden with leasing firms.

Some distributors are offering a year's free motor insurance or petrol, others are trying to woo buyers by giving away in-car televisions and DVD players or leather seats.

"The question is whether we can make up the first-half (sales) shortfall in the second half. With year-end festivities and holidays, it'll be tough," said Supatra, predicting second-quarter sales would not be much better than the first quarter's 79,400 units.

"I think any recovery will be slow and gradual," he added.

Another industry executive, who declined to be named, reckoned 2006 sales would only reach 360,000-370,000 units -- down by a third from last year.

FUEL EFFICIENCY

Toyota's market share, however, rose to around 43 percent in January-March from 34.2 percent for the whole of 2005, thanks to its fuel efficiency campaign, strong sales of its popular models and solid branding among Indonesians.

The market share of PT Astra International, which sells Toyota vehicles and is the country's biggest automotive distributor, jumped to 58 percent from 48.5 percent.

Honda, which set the marker for fuel efficiency with its popular Jazz supermini, saw its market share rise to 11.29 percent in January-March from 10 percent last year.

Among those brands hardest hit, Suzuki's market share dropped to around 11 percent in the first quarter from nearly 17 percent, while the combined share of other makes, which include many expensive European models, fell to 6 percent from 8.4 percent.

Shares in Astra, which is controlled by Singapore's Jardine Cycle & Carriage, rose 10.3 percent in the first quarter, underperforming the main Jakarta Composite Index, which gained 13.8 percent.

[Alvin]

IMF isn't very optimistic at all.
---------------------------------------------------------


IMF:Indonesia '06 GDP Growth To Slow To 5% Vs 5.6% In '05

19 April 2006
23:00
Dow Jones International News
English
(c) 2006 Dow Jones & Company, Inc.
JAKARTA (Dow Jones)--Indonesia's economic growth will slow to 5.0% in 2006 from 5.6% last year, the International Monetary Fund said Wednesday in its latest World Economic Outlook report.

That projection marks a downward revision from a 5.3% gross domestic product growth forecast that the IMF issued in late 2005, and is significantly below the Indonesian government's official forecast of 6.2%.

"(Growth) has fallen slightly short of expectations...due to high interest rates, the adverse confidence effects of financial market volatility last summer and increases in domestic fuel prices," the report said.

The IMF report projected 6.0% economic growth in 2007, below the 6.4% forecast by Coordinating Minister for the Economy Boediono on Monday.

The IMF's downward revision of Indonesia's 2006 GDP growth forecast follows recent similar moves by the World Bank and the Asian Development Bank.

The World Bank and the ADB expect Indonesia's economy to grow 5.5% and 5.4% respectively this year.

Those projections reflect the lingering impact of a steep increase in interest rates in the fourth quarter of 2005 to cool an inflationary surge after the government lifted some fuel price subsidies on Oct. 1.

In the November-December period, Bank Indonesia hiked its one-month benchmark lending rate by 175 basis points to 12.75% to curb inflation, which peaked at 18.38% in November.

By March, on-year inflation had eased to 15.74%, and Bank Indonesia decided earlier this month to keep its benchmark rate unchanged at 12.75% for a fourth straight month.

Analysts expect rate cuts as early as the third quarter of 2006, in tandem with an official projection of a decline in inflation to around 8.0% by the end of 2006.

-By Phelim Kyne, Dow Jones Newswires; 62 21 3983 1277; phelim.kyne@dowjones.com

[Alvin]

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