Weekly Economic Report

  • Global pressures concerning the Greece debt crisis have been escalating last week causing IDR to continue trading in depreciating trend. Despite the continuation of foreign funds into Indonesia bonds market IDR fell to Rp. 8,608 per USD last week after staying in the Rp.8,510 to Rp.8,530 range for about a month.
  • This week, we are expecting market sentiment continues to be jittery as the investors are waiting for the next policy taken by the Fed after the QE-2 ended in June and a final decision for the second bail out for Greece. For that reason, we think that IDR will tend to depreciate and trade in the range of Rp.8,580 to Rp.8,630 against USD in this week.
  • The result of Indonesian banking sector in April has re-affirmed the sector’s strength. Credit grows 24% yoy, operational profit increased by 25.9% yoy, stable ROA of 3%, and higher LDR of 78.4%. Most of banks except for national foreign exchange banks (only 74.4%) have achieved the lower bound of BI target of LDR ranging from 78% to 100%. Despite these positive indicators, the banks inefficiency shown by the ratio of operational cost to operational revenue remains high at 84.5%.
  • We believe that credit growth will be higher in the coming months as banking sector is anticipating higher demand for loan toward new school terms, fasting months and I’d Mubarok in July and August. Higher credit growth causes banks to reduce their assets allocation in BI certificate (SBI) by 4.4% mom and government bonds (SUN) by 3.9% mom. We remain in our view that banking sector is one of the most attractive sectors in Indonesia.