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Stock Index
Bahana Securities

23 Jun 2018 | 07:19 WIB
INDEX
SCORE
POIN
%
COMPOSITE
6.067,087
52,268
0,869%
Last 1 day
IDX30
526,492
3,551
0,679%
Last 1 day
MBX
1.718,699
17,373
1,021%
Last 1 day
DBX
964,133
-1,999
-0,207%
Last 1 day
KOMPAS100
1.248,419
12,390
1,002%
Last 1 day
BISNIS-27
530,769
4,503
0,856%
Last 1 day

Currencies
Bahana Securities

23 Jun 2018 | 07:19 WIB
KURS
BUY
SELL

Seven important market events await in June

The month of June should have several implications for stock markets, not only in Indonesia but also for the rest of the world. At this stage, we see seven crucial factors, as follows:

Possible Fed rate hike; short-term IDR weakness likely: On 16 June, the Fed will convene to decide on its interest rate policy, with recent analyst polls indicating a 32% probability for a rate hike, supported by higher Personal Consumption Expenditure (PCE) inflation of 1.7% (previous: 1.4%), strong retail sales and housing data. Assuming a June rate hike, the IDR is likely to see short-term weakness (IDR14k/1USD at end-2016F), although limited from current levels, as we expect the USD to soften post Fed rate hikes, tracking higher US inflation. Thus far, the weaker USD has been in line with our views expressed in our 2016 compendium report.

Brexit possible risk-off sentiment: On 23 June, the UK will decide whether to stay in the EU, causing possible volatility, although the latest poll suggests that 53% of Britain’s voters prefer not to leave the EU. Some economists believe that an exit could shave UK’s economic growth potential by 220bps by 2030.

Possible oil price drop post Saudi Aramco’s huge IPO: June may see the world’s largest-ever IPO by Saudi Aramco, estimated at USD125bn (Alibaba: USD25bn). There is market talk that the recent strength in oil price is related to the schedule of Saudi Aramco’s IPO.

S&P rating decision to be revealed: In early June, we may see S&P announcing Indonesia’s sovereign rating decision. This should have important implications for our bond and equity markets, as a rating upgrade would allow for greater capital inflows and lower yields. Indonesia’s outlook is kept at positive with the rating agency awaiting BI’s new policy framework as well as the government’s tax amnesty program.

Tax amnesty decision to be announced: On 14 June, the House is scheduled to vote on the tax amnesty bill, which will likely affect the government’s revenue prospects. On the fines, debate is still fierce as the parliament is demanding fines of 5-15% versus the 1-6% fines mentioned in the draft bill. Based on the repatriation terms, the government plans to set up 5 banks/financial institutions, of which 3 are SOEs (BBNI, BBRI and BMRI), which are to receive funds from tax amnesty participants. Incoming overseas funds must be brought back to Indonesia with a minimum 3-year lock-up period. The first investments must be placed in SBNs, SOE bonds or other appointed banks’ financial investments. In year 2-3, assets could move to private bonds, infrastructure investments, real estates and property. In our view, the success of the tax amnesty will depend on the 15th article in the bill, which states that “the assets which are included in tax amnesty could not be used as the evidence for any criminal investigation”. Any change to this article could result in lower tax amnesty revenue.

Cabinet reshuffle #2 on tax amnesty and Golkar support: This reshuffle could also happen in June, as political parties may decide to use this tax amnesty momentum to force President Jokowi’s hand on various ministerial appointments. Furthermore, the recent Golkar party move to join Jokowi’s camp should also help to pave the way for serious discussions on cabinet reshuffle #2 (reshuffle #1: August 2015). There is speculation that Golkar may obtain two ministerial posts: village and industrial.

Police Chief change – an important determinant: In June, Indonesia will also see political jostling related to the current Police Chief, Badrodin Haiti, as he enters his retirement age. Currently, the parliament is split, with PDI-P, Golkar, Demokrat, PKS and Hanurah asking for change, while Gerindra, PAN, PKB, PPP and Nasdem would like to see the maintenance of status quo. Based on act No. 2/2002 article 30, the Police Chief’s tenure could be extended by two years to 60 years of age, assuming there exists requirement on his special skills. Latest news reports suggest that Jokowi would like to see Budi Waseso (“Buwas”) be the next Police Chief. However, this stance has already been met with resistance among supporters of Budi Gunawan, the current Deputy Police Chief, who has close ties with Megawati. We believe that the Police Chief nomination is important for Jokowi’s political reform agenda for Indonesia.

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