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SingCham Weekly:  Positive Indonesian economic outlook in 2018

Monday, 22 January 2018

Bitcoin use under scrutiny in Bali

Indonesian authorities are investigating the use of bitcoin in Bali, amid warnings by the central bank over the risks posed by virtual currencies. BI found out from some postings on social media that Bali appeared to have become a haven for bitcoin transactions, adding that BI officials and police went undercover at the end of 2017 to investigate scores of businesses in Bali advertising online that offered bitcoin payment services. The team found two cafes still using bitcoin as a means of payment, but 44 businesses including car rental outlets, hotels, travel companies and jewelry stores, previously offering the service, had now stopped. BI will impose heavy sanctions on any payment system providers that facilitate financial transactions in cryptocurrencies. BI fears that such virtual currencies have been forming bubbles due to the lack of control by responsible authorities and the absence of underlying asset backing, which can affect financial stability and cause social harm.

Singapore joins dual-class shares club, wooing technology IPOs

Singapore Exchange said it allow companies with dual-class share structures to list, a month after Hong Kong announced a similar proposal, as competition between markets for technology listings becomes increasingly fierce. SGX will consult on the rules this quarter and expects the first listing “soon after,” CEO Loh Boon Chye said. The moves by the two Asian exchanges come as some of the world’s largest technology companies from Alibaba Group to Facebook use stock with enhanced voting power to protect the influence of their founders and management. Such structures have faced opposition from investors, who fear their rights could be eroded amid corporate governance concerns.

Singapore start-up 99.co buys Indonesian property portal UrbanIndo

Singapore’s property search start-up 99.co has acquired Indonesia’s UrbanIndo – said to be the largest property portal in Indonesia, with more than 1.2m active listings – for an undisclosed amount. With the acquisition, 99.co is believed to be among the largest property listing portals in Singapore and Indonesia. Property consumers in both countries can now access 99.co for all property-related transactions. 99.co said that acquiring UrbanIndo will be a key cornerstone to its continual growth to become the No. 1 property technology company in Indonesia. Darius Cheung, co-founder and chief executive officer of 99.co, said: “The UrbanIndo team has built up critical leadership in product, listings and consumer demand that will put us on a 10 times growth trajectory in Indonesia.” Petra Barus, chief technology officer of UrbanIndo, added that both teams will deliver “exciting new products” to serve buyers, agents and developers.

 

Singapore must accept slower rate of labour growth

Slower rates of labour force growth in Singapore are unavoidable, the head of the Republic’s central bank head said, and any attempt to completely offset it by increasing foreign workers is “neither feasible nor desirable”. Singapore faces a problem common to many developed societies, that of an ageing resident population, but has tightened restrictions on foreign workers in recent years. “We must accept a lower rate of labour force growth,” said Mr Ravi Menon, managing director of the Monetary Authority of Singapore (MAS). “The underlying demographic slowdown is so severe that it is neither feasible nor desirable to try to offset it completely through immigration of foreign workers.” Mr Menon noted that GDP growth is basically the sum of productivity growth and labour force growth, and added that increasing productivity will be vital for Singapore’s economy going forward.

Singapore office rents to rise the most in Asia 

Singapore office rents are set to post the biggest gains among Asian cities as an increase in demand runs into moderating supply, according to real-estate services firm Cushman & Wakefield. Office rents in all major Asian cities, with the exception of Tokyo, are set to rise over the next two years, according to forecasts from Cushman. Singapore will lead the pack, with rents forecast to surge 25%, more than double the 12% growth forecast in Hong Kong’s central business district. In Singapore, the rent recovery is set to gain traction as supply begins to moderate this year. Rents are forecast to climb to US$100.80 (S$133) psf/pa in 2019 from US$80.53 in 2017

 

 

Tuesday, 23 January 2018

GMF AeroAsia eyes private placement, may select Air France-KLM unit

GMF AeroAsia plans to complete a private placement in the 2Q18. At the extraordinary general meeting – scheduled for 6 March 2018 – the topic of private placement will be high on the agenda. GMF AeroAsia is expected to sell a stake between 10 % and 20% to a strategic investor. Iwan Joeniarto, President Director of GMF AeroAsia, said the company is currently studying the exact share price that will be offered to the strategic investor in this private placement. In case the company decides to sell a 20% stake it is estimated that GMF AeroAsia could raise up to US$200m. Proceeds are to be used for investment and for working capital. According to a GMF AeroAsia executive, quoted by Reuters, the MRO unit of the Air France-KLM group – named Air France Industries KLM Engineering & Maintenance – will be selected as the strategic investor. Shareholders’ approval is required at the March meeting.

Tower Bersama allocates Rp2tr capex

Tower Bersama Infrastructure prepares a capex of around Rp1-2tr throughout 2018. The company will conduct an organic development by building towers and addition of new tenants. Finance director, Helmy Yusman explained that the company will build approximately 1,000 towers with investment value of around Rp1bn per unit. While the additional target will reach 2,500 new tenants from a total of about 13,000 towers and 23,000 tenants.

Arwana Citramulia  increase production capacity

Arwana Citramulia plans to increase its production capacity by 6 million square meters. Currently the total production capacity of its plant is around 58 million square meters. According to Tandean Rustandy, CEO of the company, the addition of this capacity is not from the construction of new plant, but rather the addition from its existing factories. ARNA allocates capex of Rp200bn this year and will be used to buy machine.

 

 

Positive Indonesian economic outlook in 2018

The Indonesian economy is expected to maintain a positive outlook this year, on the back of a domestic recovery and changing monetary policies by the world’s major economies, Finance Minister Sri Mulyani Indrawati said. “We are optimistic that stability in the financial system will persist to support the growth momentum of the national economy,” Sri Mulyani said. Indonesia recorded a five-year high trade surplus of $11.84 billion last year, while inflation remained within the central bank’s target range of 3.61%. The country’s foreign exchange reserves rose to $130 billion. Bank Indonesia has set an inflation target of between 2.5% and 4.5% this year.

MOF pays over 50 Instagram users to promote Budget 2018

Singapore’s government is hiring social media users to promote its 2018 budget. Hoping to generate youth interest in state finances, the island nation’s Ministry of Finance paid more than 50 Instagram users – most of whom boast over 1,000 followers – to post on the annual economic blueprint. The ministry didn’t specify how much it’s spending on the campaign, but noted that it was in accordance with market rates.

New Code of Practice announced for four crowdfunding platforms in Singapore

Four major crowdfunding platforms in Singapore will adopt a Code of Practice that will make online fundraising safer, Minister for Culture, Community and Youth Grace Fu announced. The four platforms are ‘Give.asia’, ‘Giving.sg’, ‘The Ray Of Hope Initiative’ and ‘SimplyGiving’. The Code of Practice for Online Charitable Fund-raising Appeals was developed by the industry together with the Commissioner of Charities. It comprises best practices for crowdfunding platforms based on ensuring the legitimacy, accountability and transparency of charitable appeals hosted on the platforms.

 

 

Wednesday, 24 January 2018

State cement makers eye efficiency amid rising competition

State-owned cement manufacturers have decided to continue with efficiency measures this year in a bid to improve its bottom line amid rising competition and an oversupply in the domestic market. Semen Indonesia will pursue a more efficient production process this year following a drop in its profit last year, said its president director, Hendi Priyo Santoso. Semen Baturaja is considering to acquire a coal mine near its core business center in South Sumatra to improve its efficiency, as coal currently contributes to around 30% of the company’s cost of goods sold (COGS).

Pertamina to overhaul business structure in March

Pertamina is set to overhaul its entire business structure after its transformation into an oil and gas holding company that controls subholding companies in at least four different sectors. The government plans to transfer its 57% shares in PGN to Pertamina in March. The consolidation is expected to boost the value, debt leverage and efficiency of the two energy firms, which have long been criticized for overlapping gas infrastructure nationwide. Under the restructuring plan, PGN will be consolidated with Pertagas, in a move that will enable the former to become a subholding company in charge of midstream to downstream gas business.

Jakarta – Surabaya high-speed train project starts early 2019

Transportation Ministry Budi Karya Sumadi confirmed that the project funds for the construction of Jakarta – Surabaya high speed train comes from Japanese loans. The construction work for this project is expected to start at the beginning of 2019. He added that Indonesia and Japan had agreed that the project will be built on right of arrow in the existing trajectory and with narrow gauge. The construction of this project could be done in stages starting from Jakarta – Semarang.

WIKA “Komodo Bonds” oversubscribed 2.5 times

The initial offering of Wijaya Karya rupiah-denominated global bonds (known as “Komodo Bonds”) received a positive response from global investors. Corporate Secretary of WIKA Puspita Anggraeni said, from the target of Rp5.4tr (US$400m) WIKA get orders up to Rp 13.3tr or almost 2.5 times. She added that WIKA plans to issue the bonds by the end of Jan 2018. Previously, president director of PLN, Sofyan Basir said the company plans to issue “Komodo Bonds” before Juen 2018 with a target fund of around Rp10tr-Rp20tr.

 

Military demo for US Defense Secretary

US Defense Secretary Jim Mattis saw Indonesian troops drink snake blood, roll in glass, break bricks with their heads, walk on fire, and more, in a rare military demonstration meant to show the unique skills of Indonesia’s military. Pentagon chiefs are accustomed to seeing foreign forces carry out more routine military demonstrations during foreign travel and, ahead of the event, the press traveling with Mattis was expecting a hostage rescue drill. The ceremony at Indonesia’s armed forces HQ was far more theatrical, however, even featuring a blindfolded soldier shoot out a balloon held between the legs of one of his colleagues. At least one shot missed, although no one appeared injured. To the sounds of beating drums, the Indonesian soldiers performed a series of gripping martial arts techniques, breaking what appeared to be concrete bricks with their heads. They also smashed stacks of burning blocks with their hands.

Changi Airport’s passenger traffic hit all-time high of 62.2m

Changi Airport handled a record 62.2m passenger movements last year, 6% higher than a year ago. Airfreight throughput grew by 7.9%, crossing 2m tonnes for the first time to hit 2.13m tonnes. Terminal 4, which was opened in October, served 1.3m passengers in its first two months of operations. In December, the airport handled 5.86m passenger movements, 32,960 aircraft movements and 188,740 tonnes of airfreight throughput, making it the busiest month of the year, said Changi Airport Group. Traffic across all regions saw positive growth, with contributions coming mostly from Southeast Asia and Northeast Asia. China and India posted double-digit growths at 12% and 16%, respectively.

Singapore, Switzerland and the US are world’s best in luring talent

Switzerland, Singapore and the US are the top three countries in the world when it comes to fostering and attracting talent, according to an index compiled by INSEAD business school. In a top 10 heavy with European countries, Switzerland maintained its No 1 position from last year in the Global Talent Competitiveness Index, which looks at the ways nations and cities lure, develop and retain talented people. Singapore came in second again, while the US moved up in the ranks, rising to third place from fourth. Norway and Sweden rounded out the top five, with 15 of the top 25 countries for talent competitiveness in Europe.

 

 

Thursday, 25 January 2018

Government absorbed Rp8.6tr from auction of sharia bonds

The government garnered a total proceed of Rp8.6tr from the sharia bond issuance it made on Tuesday (23 Jan 2018), with total incoming bids amounting to Rp27.9tr. It issued five series of bonds, with yields ranging from 4.4% – 7,3% and tenor of 6 months – 20 years.

PP Presisi eyes Rp 4.9tr of revenue

PT PP Presisi is eyeing Rp 4.9tr of revenue this year. The company is targeting net profit of Rp 434bn this year or 80.83% higher compare to projected net profit of Rp 240bn in 2017. PP Presisi also eyes new contract of Rp 8tr this year or 35.59% higher compare to new contract realisation of Rp 5.9tr in 2017. The company is allocating capex for heavy equipment of Rp 1.6tr this year.

BRI sets aside Rp 9tr for inorganic growth, boosts MSME loans

Bank Rakyat Indonesia (BRI) has allocated Rp 9tr for inorganic growth plan, which comprises acquiring smaller banks, preparing one of its subsidiaries to go public and increasing shares in its newly acquired venture capital firm. The allocated money for inorganic growth is also spared for an IPO of BRI’s Islamic lender subsidiary Bank BRI Syariah this year. BRI posted consolidated net profit of Rp 29.04tr (+ 10.7% yoy) last year. The increase in net profit was supported by its loan growth of 11.4% yoy to Rp 739.3tr last year dominated by its MSME segment. The bank expects to increase the portion of its MSME segment to 80% this year of its total loan portfolio from 74.6% recorded in 2017.

 

Keppel Corp hit by S$495m loss

Keppel Corp, whose offshore and marine unit is embroiled in an international bribery scandal, has posted a net loss of S$495m in the fourth quarter of last year — largely due to the financial penalty paid to the authorities — dragging its full-year net profit down by 72% compared to the previous year. The results included the one-off financial penalty arising from Keppel Offshore & Marine’s (KOM) global resolution with criminal authorities in the United States, Brazil and Singapore, and related legal, accounting and forensics costs which amounted to S$619m in total. For the financial year ending Dec 31 last year, Keppel achieved a net profit of S$217m — compared to S$784m posted in FY2016 — after taking into account the financial penalty of S$570m, and S$49m of related costs. Excluding these one-off items, the company said it would have achieved a net profit of S$836m, an increase of 7% over FY2016. In the fourth quarter of 2016, Keppel made a net profit of S$143m.

Sing dollar hits 3-year high against US dollar

The Singapore dollar surged its highest in three years against the US dollar on Thursday, after United States Treasury Secretary Steven Mnuchin said a weaker US dollar would help trade and benefit the US economy — comments which he subsequently tried to walk back by saying he spends little time thinking about dollar weakness over the short term. As of 6.09pm, the Singapore dollar was trading at S$1.31 against the US dollar, the highest since it closed at S$1.3044 on November 2014. Mr Mnuchin’s initial remarks echoed what US President Donald Trump had said in January last year about the greenback being “too strong” which would eventually hurt the American economy. Analysts said that in the short term, the US dollar may remain subdued. However, in the longer run, factors such as a stronger US economy, interest rate hikes and tax cuts will lead the dollar to strengthen.

 

 

Friday, 26 January 2018

Agency plans one price for gas network

The BPH Migas is expected to propose the implementation of a single-price mechanism for Indonesia’s gas pipeline network, similar to the one implemented for premium and solar nationwide, so as to reduce the burden on the state budget. BPH Migas committee member Jugi Prajugio said the agency had addressed the plan to the Energy and Minieral Resources Ministry, expecting that its implementation could be effective by the end of the year despite no official proposal yet being submitted to the ministry. The agency has recommended different price benchmarks in each area, which vary between Rp4,000 and Rp6,000. The prices are all lower than those proposed by PGN and Pertagas at a range of between Rp5,000 and Rp9,000. Principally, the difference in prices is because of different gas production costs in each area depending on their proximity to the source. However, with the proposed one-price policy, BPH Migas can provide both operators with a fixed profit margin of around 5%, so they will be able to further develop their own gas networks without being fully dependent on the state budget.

New import policy to ease inflow of goods

The government is set to allow imported goods to enter the country without full document checks by the Customs and Excise Office from Feb. 1. The move is part of an attempt to slash dwell time and speed up customs clearance at key import gates. The new arrangement will affect 3,446 goods categorized as prohibited and restricted imported goods, locally known as lartas, that represent 32.02% of the total 10,826 types of goods classified under the Harmonized System Code in the Customs Tariff Book. The new import rule was among other goals expected to boost Indonesia’s exports, which last year was estimated to outperform imports, resulting in a trade surplus. Exports totaled US$168.73bn, while imports settled at US$156.89bn in the past year, according to the Trade Ministry’s estimate.

Medco issues global bonds worth US$500m

Medco Energi Internasional has issued global bonds worth US$500m with a maturity period of seven years and a coupon rate of 6.75% in an effort to refinance its debts.

Astra Agro Lestari prepares Rp1.8tr capex for 2018

Astra Agro Lestari prepared the 2018 capital expenditure as much as Rp1.8tr. President Director of Astra Agro Santosa said the amount of capex this year increased Rp100bn from last year’s. “Last year our capex was Rp1.7tr,” he said. Santosa revealed the largest allocation of capex will be made for the development of immature plant ranging from Rp500bn to Rp600bn. Besides that, Astra Agro allocated Rp250bn for the construction of a new palm oil processing factory in South Kalimantan region that will commence operation in 2019. The plant will have a production capacity of 45 tons per hour which can be increased up to 60 tons per hour. Astra Agro was also allocating Rp150bn for its new business unit of cattle farms. The remaining capex will be used for the maintenance of Astra’s mechanical equipment. The source of fund for the capex came from the company’s internal cash. According to Santosa, Astra has unused fund of Rp 1 trillion and currently reviewing the company’s plan to issue US$250m global bond with tenor of 5 years.

WIKA will obtain US$594mn from China Development Ban 

China Development Bank (CDB) has agreed to disburse US$594mn for the Jakarta-Bandung LRT, out of the total loan facilities of US$700mn initially agreed. The Ministry of SOE cited that the documents required have been handed over by WIKA. The project is guaranteed by the consortium of PT Kereta Cepat Indonesia (KCIC).

 

SMRT CEO dismisses reports of his potential resignation

SMRT CEO Desmond Kuek brushed aside talk that he is expected to step down, calling those reports “purely speculative”. Rumours of Mr Kuek’s possible resignation were fuelled by a Straits Times report last week that said observers are expecting him to step down. It also reported the resignation of the transport operator’s vice-president of corporate communications, Patrick Nathan, adding that “more management changes (are) on the cards”. SMRT has been under pressure from the public and the Government after a series of high-profile incidents.

E-cigarettes, shisha to be illegal

Starting February, buying, using and possessing tobacco products like e-cigarettes, shisha and chewing tobacco will be illegal in Singapore, the Ministry of Health said. The new prohibitions on such “emerging and imitation” tobacco products are part of the first phase of amendments to the Tobacco (Control of Advertisements and Sale) Act, which were passed in Parliament in November last year. Under the changes, anyone found in possession of, purchasing or using the prohibited products will face a fine of up to S$2,000. Currently, only those caught importing, selling or distributing prohibited products are punished.

Flu deaths may be less likely with annual vaccination

Seniors who get a flu shot every year are less likely to be hospitalised with severe influenza infections or to die from them than those who get vaccinated only sporadically, a Spanish study suggests. Researchers looked at the effect of getting annual influenza vaccinations – in terms of preventing flu-related hospital admissions or death – in people age 65 or older admitted to 20 hospitals in Spain. Compared to people who got no vaccination during the current or three previous flu seasons, getting vaccinated in the current season and at least one previous season, was 31% effective at preventing hospital admission for non-severe cases of influenza, the study found.

Singtel to offer Apple Watch Series 3 with built-in cellular service

Singtel will be the first telecommunications provider to offer a new model of the Apple Watch Series 3 with a built-in cellular service from Feb 9. The Apple Watch Series 3 was first launched in September last year, and allows users to access certain iPhone features like answering calls and sending messages through their watch alone if they have mobile connectivity through a wireless network.  With the new Apple Watch Series 3 (GPS + Cellular), Singtel users can now have access to the features on their Apple Watch Series 3 through the built-in cellular service, even if their iPhones are not nearby or switched on. This allows the new Apple Watch Series 3 to act like an iPhone.