In this briefing:
- Lead Intact, Says Preponderance of Polls / MRT Tariff Undecided / EU Trade Tension / PDP Bill Sought
- Gold May Rise on Lower Real Ylds; Canada Leads Fall in Real Ylds; Aust Inflation Expectations Slump
- Thailand’s Election – Growth Story Plays Wait and See
- FLASH: BoE Keeps Its Head Down in Mar-19
- India Monthly Report Feb’19 – Mar’19
1. Lead Intact, Says Preponderance of Polls / MRT Tariff Undecided / EU Trade Tension / PDP Bill Sought
The presidential race is unchanged as data from a premier polling firm, SMRC, shows a 26 percentage point lead for Widodo. Thus far only one poll has shown a narrow lead — 12 percent, according to Kompas — but until other data corroborates this, it appears to be an outlier that does not change the outlook. Widodo is heavily touting the MRT opening, but provincial leaders are struggling to set a tariff rate — it will therefore still be free when it opens for public use on 25 March. The Religion Ministry appointments-graft scandal threatens to implicate the minister. Trade acrimony with the EU is escalating. West Java Governor Ridwan Kamil, a 2024 presidential contender, garnered negative publicity for appointing relatives. Legislators and stakeholders are clamoring for government progress on a draft Bill on Personal Data Protection.
Politics: Eager to maximize advantages from the imminent commercial start of Jakarta’s Mass Rapid Transit (MRT) line, President Joko Widodo claimed credit for having made a “political decision” to take on the project’s cost. In fact, the magnitude of those costs to the province remains unclear: three days from the start of operations, policymakers have yet to set the tariff for riders (Page 2). The corruption scandal enveloping the Islamic United Development Party (PPP) – at the worst possible time in the election cycle – could further depress the clout of Islamic interests in the next parliament (p. 3). West Java Governor Ridwan Kamil invited criticism by appointing two relatives to a high-profile Development Acceleration Team (TAP) under his aegis (p. 4).
Surveys: The large lead for President Joko Widodo appears intact, based on findings from three recent polls, although one reputable agency produced divergent results. Widodo has a lead of at least 19 percentage points according to three surveys in late February and March: in addition to the Survey Network (LSI) and Alvara Research (discussed in recent Ref Wkly editions), new data has emerged from Saiful Mujani Research and Consulting (SMRC) placing Widodo’s margin over Prabowo at 26 percentage points. A poll conducted simultaneously by Kompas measured the lead at only 12 percentage points – but until other polling corroborates this, it constitutes an outlier that lacks significance. In any event, even if Widodo’s lead has shrunk as much as Kompas claims, he would still enjoy a comfortable cushion (p. 4).
Justice: Religion Minister Lukman Saefuddin is under scrutiny after investigators discovered Rp600 million in cash in his office desk drawer. Meanwhile, former PPP Chair Romahurmuziy failed to appear for questioning as a suspect (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]>. |
Policy News: Public officials clamored for a long-awaited Bill on Protecting Personal Data (RUU PDP) (p. 8). Energy Minister Ignatius Jonan welcomed a parliamentary suggestion to subsidize the higher-octane petroleum product Pertamax, rather than Premium – but he remained noncommittal about implementation (p. 9).
Infrastructure: Jakarta’s governor rejected suggestions from provincial legislators that the MRT should be free, or at least free for Jakarta residents (p. 10).
International: Policymakers denounced the European Union (EU) for allegedly discriminating against biodiesel from crude palm oil (CPO). The planned Comprehensive Partnership Agreement with Europe (IEU‑Cepa) could be at risk (p. 11).
2. Gold May Rise on Lower Real Ylds; Canada Leads Fall in Real Ylds; Aust Inflation Expectations Slump
- The broad decline in global bond yields and curve flattening suggest that the market has become more concerned about weak global economic growth.
- The fall in yields is at odds with the rise in equity and commodity prices this year, but the later may have lost upward momentum.
- Safe haven currencies, gold and JPY, have strengthened this week and are likely to perform well if yields remain low.
- US real yields have fallen more than nominal yields this year, with a partial recovery in inflation expectations from their fall in Q4 last year. Lower real yields point to weaker fundamental support for the USD, and further support safe havens like gold.
- Canadian real long term yields have fallen more abruptly than in the USA, into negative territory, suggesting the outlook for the Canadian economy has deteriorated more than most. This may relate to concern over a peaking in the Canadian housing market. The fall in real yields suggests further downside risk for the CAD.
- Long term inflation breakevens have fallen in Australia sharply since September last year to now well below the RBA’s 2.5% inflation target.
- Australian leading indicators of the labour market have turned lower, albeit from solid levels, and may be enough, combined with broader evidence of weaker growth, for the RBA to announce an easing bias as soon as April.
- Asian trade data and flash PMI data for major countries point to ongoing and significant weakness in global trade.
3. Thailand’s Election – Growth Story Plays Wait and See
With the elections this week, the Bank of Thailand (BoT) held rates steady at its March MPC meeting. We are eagerly awaiting the outcome of the election. We won’t place any bets on which party(ies)/coalition(s) will form the new government, but once the political fog clears, the growth story is positioned to continue.
4. FLASH: BoE Keeps Its Head Down in Mar-19
- The MPC unsurprisingly voted unanimously for no policy change again in Mar-19.
- Recent news was deemed ‘mixed’ as soft surveys and global demand partly offset the otherwise good domestic news.
- How Brexit resolves remains crucial to the optimal policy response, which can be judged after seeing the reaction of other agents amid a high option value of delay.
5. India Monthly Report Feb’19 – Mar’19
Indian indices were the least performing among the select global indices with S&P BSE Sensex and Nifty 50 generating returns of negative 1.65% and negative 0.81% in domestic terms respectively. In Dollar terms, they fell by 0.81% and 0.09% respectively. Indian Rupee witnessed an appreciation of 0.85% during the period and has risen from 71.44 USD/ INR to 70.84 USD/ INR. Among the select indices, Dow Jones was the best performer with dollar returns of 3.4%.
| Performance of Select Indices during Feb’19 | ||
| Index | Returns in Domestic Currency | Returns in USD |
| S&P BSE SENSEX | -1.65% | -0.81% |
| NIFTY 50 | -0.93% | -0.09% |
| Nikkei 225 | 2.87% | 1.17% |
| Dow Jones Industrial Average | 3.40% | 3.40% |
| HANG SENG | 2.51% | 2.49% |
| FTSE 100 | 0.78% | 2.22% |
Among the sectoral indices, Nifty Media was the highest gainer with a 17.56% return in domestic terms and 18.56% in USD terms. The worst performer has been Nifty PSU Banks with a decrease of 5.82% in domestic terms and 5.02% in USD terms.
Performance of Indian Sectoral Indices in USD | INR Returns | USD Returns |
NIFTY MEDIA | 17.56% | 18.56% |
NIFTY METAL | 1.99% | 2.85% |
NIFTY IT | 0.05% | 0.90% |
NIFTY REALTY | -0.50% | 0.35% |
NIFTY PVT BANK | -0.59% | 0.26% |
NIFTY PHARMA | -0.94% | -0.10% |
NIFTY AUTO | -1.02% | -0.18% |
NIFTY BANK | -1.09% | -0.25% |
NIFTY FIN SERVICE | -2.04% | -1.20% |
NIFTY FMCG | -3.10% | -2.28% |
NIFTY PSU BANK | -5.82% | -5.02% |
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