Early days yet
Golkar Chairman Aburizal Bakrie's appointment as coalition chief, may pave the way for political stability. However, it remains to be seen if the stability comes at the expense of reform. In any case, it makes the credibility of Sri Mulyani's replacement all that more crucial.
What are the pros and cons?
While it is too early to render judgment, we believe Mr Bakrie's ability to exert his influence is very much a function of his success in his new role, which is akin to a chief whip for the coalition political parties. It is clearly quite a task to manage a six-party coalition. Specifically, this might mean ending the protracted Bank Century case, which has significantly distracted the government. In addition, we also look towards his ability in helping the government push through crucial bills such as the land acquisition bill, etc. Only on successes in such areas might he earn his influence. Also, political dynamics amongst the coalition parties, along with credible individuals in the government, can provide proper checks and balances.
Market implication
Thus far, recent newsflow as been discouraging on the surface. But we believe they are unlikely to derail Indonesia's strong growth trajectory. In fact we believe the country, which more than doubled in the past five years on relatively 'lazy capital', should see stronger growth as credit begins to play a much larger role. In addition the already very visible rise in investment and the consumptive nature of consumers, should ensure sound growth. It is also interesting to observe a change in the market emphasis, which seems to be increasingly shifting focus towards Indonesia growth prospect than the risks, as in the past. Hence any market pull-back is seen more as buying opportunity.
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