The exports-imports data released on 1 Dec suggest that the worst is over for the current
account deficit (CAD). The increase in gas exports was significant as the spike in gas exports (up 43.4% m-o-m or USD476.1m) was equivalent to 11x the trade surplus (USD42.7m) in Oct. We think the
improving trade data and softer Nov inflation may prompt BI to hold the BI rate steady this month.
We expect to see the market respond
positively in December.
¨
An inflection point? We see the better Oct trade data as a signal that the worst is over for Indonesia’s CAD
although we do not expect it to
revert
to a surplus in the next few quarters. Furthermore, the improvement in
the
current account had been at the expense of
economic growth. We believe that under the current economic scenario, the CAD is caused by structural problems, and an acceleration in economic growth in the near
future will led to a deterioration in the CAD. Our economist believes that the Oct trade data
showed that the impact of a weaker rupiah on the trade balance had been positive. The rupiah, which averaged around IDR11,073/USD during the month, has depreciated by 15% YTD.
¨
Indonesia
posted a trade surplus of USD42.7m in October, boosted
by improving exports of non-oil and gas (+5.7% m-o-m) and imports of
oil and gas (-6.5% m-o-m). Nevertheless, we also saw the export volume of crude oil continue to decline (-29.4% m-o-m) during the month. We noted a sharp 43.2% m-o-m jump in gas exports in Oct, which in absolute amount totaled USD476.1m. We had been expecting gas exports to rebound since Aug, but it only happened
in Oct. Meanwhile, we are unable to conclude if the drop in oil imports was caused by a decline in industry or private consumption as the data
is
still unavailable.
¨
BI rate
to hold steady
in December. Looking at
trade data and the November inflation numbers, our economist thinks that Bank Indonesia (BI) might
not raise the benchmark rate at its meeting
next week. However, BI will remain vigilant
and may still raise the bechmark rate in early 2014. The November inflation of 8.37% y-o-y showed that worries of imported inflation did not materialize. In addition, with the impact
of the
fuel price hike fading, the inflation number is also providing some comfort..
¨
Priming
for a Santa
Claus
rally? Although
we do not believe that
Santa will hand out any goodies for the
stock market, we expect the
JCI
to post positive return in December,
driven
by a
better
current account
defict and more
benign inflation.
However, we remain cautious on the market as domestic economic problems
continue
to linger while the
impact of the US
Fed’s expected
tapering has yet
to be fully
priced in. As we work on our 2014 model
portfolio,
we maintain our 4Q13 stock picks
of AALI,
BMRI, BSDE, RALS, GGRM, PGAS, SMGR, TBIG and TLKM,
while
our
small-cap
picks
are TELE,
WIIM, TAXI, INDS, MAIN,
and ARNA.
Source:
RHB
OSK Indonesia Research Institute - dated 3 December 2013
