Mandiri Sekuritas Limited impact of Greece debacle on Indonesia economy

􀂄 Euro-region ministers agreed to a bailout packages to Greece totaling 110bn-euro ($146bn) to prevent a default. There’s some $30bn of debt will mature in April and May-10. EIU will pay 80bn Euros at a rate of around 5% and the IMF contributes the rest i.e. 30bn Euros.

􀂄 As a respond, the 5-yr Greece’s CDS eased to 722 from the highest 825 on 27 April when S&P cut its rating from BBB+ to junk bonds BB+. The ongoing crisis in Greece gives confident that EU inflationary pressures pretty much non-existent in medium-term and interest rate hikes might remain a distant prospect.

􀂄 Worries over contagion from Greece have curbed the rise in Indonesian bond market. However, we believe the impact would be short lived as Indonesia’s fundamental economic is still robust. Indonesian CDS rose slightly (155bps vs. 162bps) yet there’s no signal that capital outflow emerged as rupiah currency traded relatively stable at 9,000 levels during the week. Foreign ownership in rupiah government bonds reported a record high to Rp148.5tn (almost 25% of total outstanding) as of Apr29. The 10yrs US$ and rupiah bond yield currently are trading at 5.31% and 8.6% lowering by 0.05ppt and 1.46ppt compared to end of last year.