Indonesia Outlook

2020

15 May 2020
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Tamara Henderson, PhD, CFA
May 15, 2020
 Global Big Picture

 Asean Comparisons

 Indonesia: 2020 So Far

 What’s Next: 2Q and Beyond

4
 Covid-19 Struct-
ural
Trade Factors
War Financial
Market
Stress Oil
Price
War
2020
Source: Bloomberg Economics
5
 Stealth Virus

Global
Connectivity

China
Reliance

Source: Bloomberg Economics

6
 Persistence of virus remains unclear.
 Younger populations may have an advantage.

COVID-19 Latest One Month Earlier

Cases Deaths Cases Deaths
Asean-5 58,914 1,903 17,617 690
Indonesia 14,265 991 3,842 327
Malaysia 6,726 109 4,530 73
Philippines 11,086 726 4,428 247
Singapore 23,822 21 2,299 8
Thailand 3,015 56 2,518 35

China 84,011 4,637 83,096 3,343

U.S. 1,347,388 80,397 529,951 20,608
Global 4,212,869 287,534 1,777,676 108,871

Source: WHO (As of May 11, 2020)

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 Reported cases are distorted by testing ability.
 Population size & health care facilities also matter.

% of POPULATION Latest One Month Earlier

Cases Deaths Cases Deaths
Asean-5
Indonesia 0.0053% 0.0004% 0.0014% 0.0001%
Malaysia 0.0205% 0.0003% 0.0138% 0.0002%
Philippines 0.0102% 0.0007% 0.0041% 0.0002%
Singapore 0.4201% 0.0004% 0.0405% 0.0001%
Thailand 0.0044% 0.0001% 0.0037% 0.0001%

China 0.0060% 0.0003% 0.0059% 0.0002%

U.S. 0.4092% 0.0244% 0.1609% 0.0063%
Global 0.0556% 0.0038% 0.0234% 0.0014%

Source: Bloomberg Economics, WHO (As of May 11, 2020)

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 U.S. protectionism slowed global growth to 2.9% in 2019 from 3.6% in 2018.
 The global economy will likely contract by 4% this year, despite aggressive policy responses.

Source: Bloomberg Economics

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 The economy contracted by 6.8% year on year in 1Q 2020, better than we expected.
 China remains on course for a V-shaped recovery, albeit a stunted one.

Source: Bloomberg Economics

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 Partial lockdowns pushed unemployment up 10.3 ppts to a seasonally adjusted 14.7% in April.
 Unemployment should peak around 20% in May, but is likely to remain near 10% into year-end.

Source: BLS, Bloomberg Economics

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Source: Bloomberg Economics
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 Indebted Households/SMEs: Makes economy more vulnerable to
deflation and reduces effectiveness of policy transmission.

 Greater Tourism Sensitivity: This sector may be the last part of the
global economy to normalize from the Covid-19 shock.

 Dwindling Conventional Policy Space: Government debt is approaching

the 60% of GDP benchmark for sustainability. BOT policy rate is 75 bps.

 Political Tension: Makes investors more wary, slows decision-making.

Source: Bloomberg Economics
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 Data: Growth slowed by 2 ppts in 1Q to 2.97% y/y. Household spending
and investment were markedly weaker, even though the economy had
not yet been locked down.

 Covid-19: Fatalities relatively low, but picked up sharply since March.

 Markets: The Jakarta Composite is lagging in Asia with a loss of ~32%

this year in USD terms. Bonds are also underperforming (yields up).

 Policy: The government removed its statutory budget deficit limit of 3%

and Bank Indonesia has stepped up QE.
Source: Bloomberg Economics
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 2Q Growth: Much worse than 1Q due to broader global and local
lockdown to stem the pandemic, and second-round effects.
 2Q Markets: Further stress can’t be ruled out should hopes for a
brighter 2H fade. WHO says we have “a long way to go.”
 2Q Policy: Bank Indonesia may lean on QE, rather than rate cuts that
risk undermining the rupiah.
 2020, 2021: Contingent on virus remedy and, ahead of that,
getting/keeping Covid-19 contained to preserve as much economic
activity as possible. Non-virus risks may resurface.
 After 2021: Growth will be constrained by debt repayment/write-offs,
savings replenishment and potentially higher risk premiums.
Source: Bloomberg Economics
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 Bloomberg Economics
 23 economists covering 6 continents

Source: Bloomberg Economics

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Indonesia Banking Sector
Outlook

15 May 2020

Diksha Gera
Sector Leader, Global Financials
Bloomberg Intelligence
 China’s Share of Total Export by Country

Source: ECTR<Go>, Bloomberg Intelligence

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Asia’s Credit Recovery Faces Virus Headwinds

Source: ECFC<Go>, Bloomberg Intelligence

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Banks’ Revenue At Risk from Macro Headwinds

Source: Central Banks, Bloomberg Intelligence

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U.S. Federal Reserve vs. Market Implied Rates

Data as of 12 May 2020

Source: DOTS<Go>, Bloomberg Intelligence
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Asian Economies Consensus Rates

Data as of 12 May 2020

Source: Central Banks, Bloomberg Intelligence

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 Coronavirus Cases in ASEAN, China

Source: ECTR<Go>, WHO, Bloomberg Intelligence

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Indonesia Relief Measures Unveiled to Counter Virus

Source: KPMG, Bank Indonesia, Bloomberg Intelligence

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 Indonesia Consumer vs. Business Loan Growth

Source: Bank Indonesia, Bloomberg Intelligence

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 Indonesia Banking March Sector Loan Segments

Source: Bank Indonesia, Bloomberg Intelligence

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 State-Owned vs. Private Sector Banks Loan Growth

Source: Bank Indonesia, Bloomberg Intelligence

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 Indonesia Banks Loan Growth Comparison

Source: Company Filing, Bloomberg Intelligence

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 Indonesia Consumer Segment Loan Growth

Source: Bank Indonesia, Bloomberg Intelligence

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Indonesia Banking Net Interest Margin Pressure

Source: Bank Indonesia, Bloomberg Intelligence

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 Indonesia Banks Reserve Requirement Ratio

Source: Bank Indonesia, CEIC, Bloomberg Intelligence

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Indonesia Banking Loan-to-Deposit Ratio

Source: Bank Indonesia, Bloomberg Intelligence

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 Indonesia Banking Sector February NPL Ratio, %

Source: Bank Indonesia, Bloomberg Intelligence

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 Industrial vs. Non-Industrial NPL Breakup, bil Rupiah

Note: As of February 2020

Source: Bank Indonesia, Bloomberg Intelligence

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 Consumer NPL Breakup, bil Rupiah

Note: As of February 2020

Source: Bank Indonesia, Bloomberg Intelligence

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 Industrial NPL Breakup, bil Rupiah

Note: As of February 2020

Source: Bank Indonesia, Bloomberg Intelligence

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 Industrial NPL Ratio by Segment, %

Source: Bank Indonesia, Bloomberg Intelligence

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 Non-Industrial NPL Ratio by Segment, %

Source: Bank Indonesia, Bloomberg Intelligence

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 Indonesian Banks Relative Performance vs JCI

Note: As of 12 May 2020

Source: Bloomberg Intelligence

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 Indonesian Banks YTD 12 May Share Performance

Note: As of 12 May 2020

Source: Bloomberg Intelligence

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 Indonesian Banks Forward P/B vs. 10-Year Historical

Note: As of 12 May 2020

Source: Bloomberg Intelligence

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 Indonesian Banks Forward P/B

Note: As of 12 May 2020

Source: Bloomberg Intelligence

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Indonesia Outlook

Tools to help identify FX trends

15 May 2020

Kevin Lau
Workflow Specialist
Bloomberg L.P.
Volatility Index – VIX Provided direction to Equity movement

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VIX Index and USD Index movement

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USD Index chart patterns

Triangle -
continuation
pattern
Which way ?

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CFTC – Speculators Positioning in USD market

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 Speculators building up Long USD
positions
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USD/IDR LONG TERM CHART

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 VOLC - IMPLIED VOLATILITY & RISK REVERSAL

1 m Vol is lower than 2008

So is
Risk Reversal, while
positive, it is lower than
2008

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 EUR/USD CHART OF 1 MONTH IMPLIED VOL

EUR 1 MONTH VOLS ARE

LOWER THAN 2008

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VIX index and USD/ IDR

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USD index – monitor what is happening to USD Index for
direction on USD/IDR

Triangle -
continuation
pattern
Which way ?

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OTHER TOOLS THAT MAY HELP
WFII - FOREIGN OWNERSHIP FLOW

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YTD FOREIGN OWNERSHIP FLOWS IN BONDS AND EQUITIES

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XNDF - COMPARE ONSHORE FWDS VS OFFSHORE NDF

ANALYZE CALENDER
SPREADS

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OTC IDR - MONITOR DNDF

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Thank you