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Stock Index
Bahana Securities

23 Oct 2019 | 18:15 WIB
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Currencies
Bahana Securities

23 Oct 2019 | 18:15 WIB
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Cuts in administrated prices strengthen rupiah

Oil & gas exports -22.28% y-y to USD1,582m; Non-oil

Slightly higher than ours (-0.21% m-m, 4.30% y-y) and consensus (-0.16% m-m, 4.36% y-y), the consumer price index (CPI) inflation is at -0.09% m-m or 4.42% y-y (January 2016: 0.51% m-m; 4.14 y-y) on higher-than-expected core inflation at 0.31% m-m or 3.59% y-y (BS: 0.22% m-m, 3.49% y-y).

On the deflation side, electricity price cuts in February had an impact this time with energy-related and housing CPI entering negative territory at -2.04% m-m and -0.45%m-m, respectively. Prices were lower for electricity tariffs, onions, chicken, fuel, chili, spinach, air transportation tariffs and orange.


On the other hand, these segments drove monthly inflation: clothing at 0.64% m-m; processed food, cigarettes and tobacco at 0.63% m-m; health at 0.26% m-m; and education at 0.06% m-m (exhibit 3).


On the wholesale side, the domestic wholesale-price index rose to 0.08% m-m and 12.49% y-y (Jan 2016: +1.06% m-m; +11.44% y-y), supported by higher agriculture price index by 1.43% m-m or 55.30% y-y while some sectors is still in downturn, such as mining at -0.67% m-m and -2.47% y-y (January 2016: -0.11% m-m; -1.66% y-y); manufacturing at -0.35% m-m and +3.19% y-y (January 2016: +0.58% m-m; +3.39% y-y).


On the international trade front, non-oil and gas imported price inflation dropped to -0.02% m-m and +4.45% y-y (January 2016: +0.28% m-m; +5.05% y-y), and non-oil and gas export-price inflation fell to -0.76% m-m but rose +4.11% y-y (January 2016: +1.49% m-m; +2.92% y-y). In general non-oil and gas wise, the wholesale price index fell to -0.07% m-m and rose to +9.86% y-y (January 2016: +1.02% m-m; +9.02% y-y) (exhibit 2).


Yesterday, the government finally announced further electricity tariffs cuts by 2.66-2.71% from February tariff levels across all segment (exhibit 1). Cumulatively, we already had around 10% cut in electricity tariff since January 2016.


For fuel prices, the state owned oil company, Pertamina, also announced the decision to cut the non-subsidized fuel price by a range of 1.32-2.45% this month, and it plans to announce the decision for subsidized fuel prices in April.


Hence, deflationary pressure should persist in March. The expectation of lower energy price and higher disposable income should provide support for continued IDR appreciation in our view.

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