Brief Indonesia: Quick Take: Asian LNG Spot Prices Fall Below the UK NBP Gas Price and more

In this briefing:

1. Quick Take: Asian LNG Spot Prices Fall Below the UK NBP Gas Price
2. Semiconductor Memory Business Shrinking Fast
3. The Dollar Is Already Dead
4. Election Body Pressured / Lippo Tested / FDI / AGO Martyrs Foe / SMI on GDP / Matchfixing / CPO Fuel
5. 2019 Semiconductors: 5%+ Decline

1. Quick Take: Asian LNG Spot Prices Fall Below the UK NBP Gas Price

Asian LNG spot prices have dropped for a short time below the UK NBP gas price, reversing the established trend that sees Asian LNG offering a premium to the European LNG price benchmarks. This note takes a look at the latest trends in the LNG markets and the renewed plans unveiled by Qatar to challenge its competitors, in particular, those from the US.

2. Semiconductor Memory Business Shrinking Fast

Earnings have been announced for Intel, Samsung, SK hynix, and Western Digital, and the memory business is clearly undermining all of these companies’ earnings.  In this Insight I review each of the  companies to show where they are, and will explain what the future holds for them as today’s oversupply unfolds.

3. The Dollar Is Already Dead

The past year has all been about dollar strength. That is an accepted wisdom. But the truth of the matter is that the dollar averaged 93.6 on the DXY in 2018 (3 January 2018 to 31 December 2018) and, as we write, stands at 95.5. From 1 January 2015 to 1 July 2017 the DXY averaged 97.2. The dollar is not strong, even by recent history standards. Moreover, it is no longer as important as it once was in policy making terms – and neither is the Federal Reserve.

4. Election Body Pressured / Lippo Tested / FDI / AGO Martyrs Foe / SMI on GDP / Matchfixing / CPO Fuel

Police interrogated members of the independent General Election Commission (KPU), pursuant to a spurious case in which a coordinating minister has a conflict of interest.  If police persist, perceptions of the election’s legitimacy could suffer.  Lippo is under scrutiny for repudiating a foreign creditor — and the Information Ministry.  FDI fell y-o-y in Q418 but rose q-o-q.  Prosecutors blundered by jailing an opposition agitator for anodyne tweets.  Indrawati is sanguine about 2019 GDP.  The Football Association — a coveted rentier structure — is up for grabs again.  Pertamina’s Eni JV for green fuels from CPO is questionable on numerous levels.

Politics:  The Gerindra parliamentary candidate Ahmad Dhani suffered incarceration for having issued tweets in 2017 that judges deemed hateful.  The rock star is uncouth and has evoked hatefulness at times (he dressed as a Nazi in a 2014 ad for Prabowo Subianto) – but his sentence reflects work by prosecutors that is shoddy if not expressly politicized.  President Joko Widodo may lose more, from damage to his image, than he gains from the jailing of an opponent.  In any event, the case focuses overdue scrutiny on draconian aspects of the 2008 Electronic Transactions and Information Law (UU ITE) (Page 2).  Gerindra Chair Prabowo Subianto again harped on his claim that state debt is excessive.  Apart from being false, the claim is far from the concerns of voters.  With 10 weeks left to campaign, Prabowo has yet to critique Widodo effectively (p. 4). 

Election Preparations: If police continue to pursue spurious complaints from Hanura Chair Oesman Sapta Odang, the effectiveness of the General Election Commission (KPU) will be at stake (p. 5).  The 17 February one‑on‑one presidential debate will allow for unrestricted sparring during one segment (p. 6). 

Justice: Press scrutiny is focusing on a Commercial Court ruling that accepted a dubious settlement in bankruptcy proceedings for the Lippo Group subsidiary PT Internux.  The majority of creditors are clearly group affiliates.  Accepting their 30‑year restructuring hurts an offshore creditor, Raiffeisen, while mistreating the Information Ministry (p. 7). 

Papua: Yet another attack in Nduga District struck an aircraft, killing a soldier (p. 8).

Policy News: The government’s index of bureaucratic‑reform progress was static in 2018 (p. 10).  Pertamina intends to develop biorefineries in Sumatra with Italy’s Eni S.p.A., for the stated goals of promoting clean energy and reducing the trade deficit.  But the scheme may well do neither, if palm plantations expand at the expense of forest, while palm oil (CPO) exports contract.  The energy minister also mentioned subsidizing green fuel, which would be fiscally unsound and inequitable (p. 11). 

Economics: Investment Coordinating Board (BKPM) Chair Tom Lembong confirmed that fourth‑quarter Foreign Direct Investment (FDI) fell 12 percent year‑on‑year, although it at least rebounded 10 percent from the third quarter.  He reiterated criticism of government ranks for mis‑implementing the president’s policy vision (p. 13).  Finance Minister Sri Mulyani Indrawati emphasized potential to sustain GDP growth in 2019 based on consumer demand from households (p. 15).  

5. 2019 Semiconductors: 5%+ Decline

An earlier post outlined the general direction of the Objective Analysis 2019 forecast but didn’t provide any numbers.  In this post I explain the 5%+ decrease in revenues that the market will experience and how and why various elements play into that number.