Indonesia's loan growth will probably surpass the central bank's estimate this year as low interest rates help drive demand in Southeast Asia's biggest economy, the nation's largest lender said.
Commercial lending may rise as much as 25 percent, more than last year's 23 percent growth and higher than Bank Indonesia's 2011 estimate of 24 percent, as slowing consumer prices allow policy makers to hold borrowing costs at a near- record low, PT Bank Central Asia President Director Jahja Setiaatmadja said in his first interview since being named to the position in June.
The central bank has left interest rates unchanged at 6.75 percent at its past five meetings, helping to boost private consumption. Gross domestic product will probably expand 6.3 percent to 6.8 percent this year, Governor Darmin Nasution said on July 12, the highest level since the Asian financial crisis that started in 1997, according to government data.
"If we look at Indonesia's macro economic growth, especially with demand for commodities still picking up, that drives income," Setiaatmadja said yesterday in his office in Jakarta. "If people can work and get more income, they will spend most of their income for consumer goods. That's good for the economy because it will create demand and factories will start to produce more and more."
The International Monetary Fund projects Indonesia's growth at around 6.5 percent in 2011-12. "There are no signs of any misalignment in the exchange rate, and export growth is strong - including in manufacturing," the IMF said in a statement released in Washington on July 22.
Eoin Treacy's view Following the Asian Financial Crisis,
Indonesia went through a painful economic and political restructuring. As a
major oil producer in its own right as well as exporting tin, coal and other
industrial commodities, Indonesia was well placed to benefit from the onset
of the commodity bull market in 2003. It was among the best performers until
the 2008 peak and subsequently has been among the temporal leaders as well as
posting impressive absolute returns.
The Rupiah has been largely rangebound following the Asian Crisis but has appreciated steadily since late 2008 and took out the pre-crisis peak more than a year ago.
The Jakarta Composite Index bottomed in 2008, was among the first to break out of its base, took out its 2008 peak in April 2010 and remains in an impressively consistent medium-term uptrend. It has now rallied for the last six consecutive weeks and is becoming somewhat overextended relative to the 200-day MA. The first clear downward dynamic, sustained for more than a day or two, is likely to signal the beginning of the next reversion towards the mean.
The Jakarta Finance Index has led the wider market which we view as a positive sign. Liquidity providers should prosper in a bull market. When they fail to do so, it asks questions about the sustainability of the trend and is likely in response to central bank tightening. Bank Central Asia, Bank Rakyat, Bank Bukopin and Bank Mandri are among the better performers.
The Jakarta Miscellaneous Index has outperformed the market by a wide margin. Astra International, at 79% of the sector, dominates along with a number of other auto industry shares. It is also overextended relative to the mean and the likelihood of a reversion will increase on the first sustained downward dynamic.
The Jakarta Consumer Goods Index has also been among the better performers and is becoming increasingly overextended relative to the 200-day MA. Unilever Indonesia yields 2.82% and has been consolidating mostly above IDR1400 since early this year. It rallied impressively this week and a sustained move below IDR14,500 would be required to question potential for some additional upside. Indofood Sukses yields 2.11% and is performing in line with the wider market.
The Jakarta Agriculture Index and the Jakarta Mining Index remain in consistent medium-term uptrends and would need to break their progressions of higher major reaction lows to question medium-term scope for additional upside. Coal miners such as Adaro Energy remain in consistent medium-term uptrends and recently found support in the region of their moving averages. Bumi Resources has lagged but exhibits recovery potential and also found support in the region of its 200-day MA recently.
Indonesia has a large number of factors in its favour and has demonstrated the political resolve necessary to carry out reform. The stock market's performance has been particularly impressive against the anxious environment which has prevailed in the USA and much of Europe. Most ASEAN stock market indices have performed well in their local currencies but the relative strength of their currencies has been an addition factor which has attracted foreign investor interest. This suggests that the currency trend as well as the respective financial sectors will be useful bellwethers in monitoring uptrends for the region.