In this briefing:
- 2019 Asia Casino Forecast: Highlights by Country and Performance
- BBTN: Indonesia Has Special Mention Problems Too
- NextDecade’s Oil-Linked Contract Offering Signals More Hurdles Ahead for US LNG Project Developers
- UK Trip – Wake up to Deflation Risk
- Prabowo Errs Again; Widodo Lead Intact; Riady’s Mei-Egg-Karta; BI Holds; Repsol’s Find; Debate Text
1. 2019 Asia Casino Forecast: Highlights by Country and Performance
- Headwinds linger, but are beginning to lose velocity as consumers defy macro fears.
- VIP slowdown should peak by Q3 and begin northward creep as bankrolls replenish.
- Valuations today do not yet fully reflect the beginnings of a sector recovery.
2. BBTN: Indonesia Has Special Mention Problems Too
Bank Tabungan Negara Persero (BBTN IJ) appears to have a nasty combination of high Special Mention Loans (SMLs) and elevated “past due but unimpaired Loans”.
The implication is that provisioning levels are insufficient in an environment of eroding asset quality.
But the bank continues to grow credit by around 20% YoY.
The bank is hugely exposed to the retail real estate market (91% of Loans).
In fact, the Indonesian Banking Sector is rife with high SMLs and in some cases elevated “past due but unimpaired Loans”.
SMLs are traditionally associated with Chinese under-reporting of underlying bad loans, and hence the production of a somewhat flattering Asset Quality picture.
Maybe, the health and valuation of the Indonesian Banking Sector needs to be reassessed with implications for IDR.
3. NextDecade’s Oil-Linked Contract Offering Signals More Hurdles Ahead for US LNG Project Developers
NextDecade Corp (NEXT US) recently announced that it started offering long-term contracts indexed to the crude Brent in order to attract more LNG buyers. This follows the agreement reached by Tellurian Inc (TELL US) with Vitol back in December to index a long term contract with the Asian LNG price benchmark JKM. While typically US LNG projects are indexed to the Henry Hub, declining crude oil and LNG prices seem to have diminished the appeal of the Henry Hub pricing compared to the oil indexation. This insight takes a look at the latest trends in the LNG markets to assess which companies are taking the lead in the race to bring to FID in 2019 their proposed LNG projects.
Exhibit 1: NextDecade adds Brent indexation to its commercial offering
![](https://static-prod.smartkarma.com/images/media/000/079/853/original/Picture1.png?1550843678)
4. UK Trip – Wake up to Deflation Risk
By Bo Zhuang, Chief China Economist
- London-based investors are turning cautiously optimistic on China’s growth outlook amid the latest easing measures in January
- There is still little awareness about the rising deflation risk
- Interest in the trade war has subsided
5. Prabowo Errs Again; Widodo Lead Intact; Riady’s Mei-Egg-Karta; BI Holds; Repsol’s Find; Debate Text
Prabowo again squandered a chance in a debate to gain ground, as Widodo appeared more confident and in command. Prabowo’s incessant efforts to sow fear of foreigners does little to weaken his opponent. Widodo’s lead was intact as of late January, despite claims from two pollsters (Indomatrik, Median) who are demonstrably unreliable or even fraudulent. Lippo Group owner James Riady suffered repudiation: after having testified in court that he met the Bekasi District chief by coincidence and did not discuss his Meikarta project with her, KPK prosecutors played a phone recording that shows otherwise. BI has held rates steady, citing the current account deficit after a gaping January trade deficit. The government continues its efforts to sack more than 2,000 civil servants who are corruption convicts. Repsol discovered gas in South Sumatra.
Politics: The second of five debates in the presidential election marked another missed opportunity for Gerindra Chair Prabowo Subianto to gain ground on President Joko Widodo. Instead, the incumbent again landed blows that hurt the retired general, highlighting his unfamiliarity with e-commerce jargon and drawing attention to his land assets measuring 340,000 ha. For his part, Prabowo pointedly projected a conciliatory demeanor, perhaps to dispel perceptions that he is temperamental, but it squandered a chance to assail the incumbent and thereby persuade voters to opt for change. Prabowo adhered to form by advocating protectionism and expansion of state involvement in the economy. He used nearly every answer to disparage foreigners, which is an error: sowing suspicion of foreigners does little to weaken his opponent (Page 2) (Transcript translated by Ref Wkly, p. 8). Hard‑line Islamic groups convened again in Jakarta (p. 3).
Surveys: In the July 2014 election, the Center for Strategic Development and Policy Studies (Puskaptis) performed a Quick Count survey of ballot‑station results that declared Prabowo the winner, and the Association of Polling Firms (Persepsi) ousted Puskaptis from its ranks. But the head, Hasan Yazid, has re‑emerged as the founder of Indomatrik, another purported polling firm. Yazid claims to have findings showing Prabowo’s support on par with Widodo’s. Along with supposed findings from another obscure agency, Median, this is injecting confusion into perceptions of the presidential election. In fact, two reputable agencies determined in late January that Widodo’s lead was intact (p. 4).
Justice: In the Meikarta‑Lippo bribery scandal, prosecutors dispute the testimony provided in court last month by group owner James Riady (p. 5). Information Minister Rudiantara faced questioning from the Election Oversight Agency (Bawaslu) for having jested, in an event with ministry personnel, about preferences for presidential tickets (p. 7).
Policy News: Cabinet members are preparing measures that will finally force regional officials to sack civil servants convicted of corruption (p. 7).
Produced since 2003, the Reformasi Weekly Review provides timely, relevant and independent analysis on Indonesian political and policy news. The writer is Kevin O’Rourke, author of the book Reformasi. For subscription info please contact: <[email protected]>. |
Energy: Spain’s Repsol announced the largest gas discovery in 18 years – a reservoir in Musi Banyuasin, South Sumatra measuring two trillion cubic feet (p. 8).
Economics: Bank Indonesia (BI) kept its benchmark rate unchanged at 6.0% (p. 9).
Appendix: The presidential candidates debated the topics of infrastructure, the environment and natural resources on 17 February (transcript and analysis, p. 9).
Get Straight to the Source on Smartkarma
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.