1H reporting is in full swing – see below for comments. In general, most results were good with many beating consensus. The stands out were clearly the domestic consumption plays with Indocement, Gadang Garam, Astra, poultry play Charoen Pokphand, tire maker Gajah Tunnggal and even media company Surya Citra reporting stellar numbers.
Banks and property companies were pretty much in line with consensus. Note that 1H marketing sales of Summarecon and Bumi Serpong have been spectacular but won’t be booked as revenue until next year when full payment has been received. We would need to revise up 2011 earnings in a big way. Commodity and commodity related companies were the obvious expected underperformers
What’s more important to note is the currency. The rupiah easily broke through the IDR9,000/USD resistance today and is now trading close to our 8,950 end-2010 target. We had correctly argued that it would be impossible for Bank Indonesia to resist a break through 9,000 given the massive net capital inflows.
Indonesia saw $11bn of FDI in 1H10, net inflows into government bonds and forex reserves rose $10bn over the same period. Maybe the central bank will tell Gita to stop promoting Indonesia so hard. Given that he is aiming for over $100bn in FDI flow something will have to give here.
Next week's BI meeting will be an interesting one, inflation will be up to 6-6.5% and they are the only major Asian central bank not to have hiked rates yet; the pressure is on the new governor. Tony Nafte thinks Bank Indonesia will not have much choice but use appreciation as a monetary policy tool for curbing inflation. Official expectations are for a 1% MoM rise in July inflation (following the electricity price hike) which will lift the annual rate to 5.6% YoY (a doubling of inflation since the end of last year). We maintain our forecast for a 75bp increase in interest rates by end-March 2011.
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