Brief Macro: Trade Talks/Tech Trouble/ Rural Revival/Data Digest /Bad Bonds and more

In this briefing:

1. Trade Talks/Tech Trouble/ Rural Revival/Data Digest /Bad Bonds
2. FLASH: UK Consumer Is Bullish BoB in Jan-19
3. Widodo Sets GIAA Fare / Ahok In PDI-P / Prabowo Still Misfiring / Oz Cepa / KPK on Beneficial Owners
4. FLASH: UK Parliamentary Theatrics Divorced from Deal

1. Trade Talks/Tech Trouble/ Rural Revival/Data Digest /Bad Bonds

China News That Matters

• Will tariff hike be delayed to May?
• Like rugby without the All Blacks!
• Funding the farmers – with better financial services
• Good signs, bad signs
• High time for a check-up

2. FLASH: UK Consumer Is Bullish BoB in Jan-19

• UK retail sales more than recovered their Dec-18 fall with a Jan-19 resurgence back above an already brisk trend. I still see the BoE as overly gloomy on demand.
• Surveys have softened amid ongoing political uncertainty, but the average British consumer appears bored of Brexit, and the so-called “BoBs” keep spending. Official data exceeded the surveys after the referendum and are doing so again.

3. Widodo Sets GIAA Fare / Ahok In PDI-P / Prabowo Still Misfiring / Oz Cepa / KPK on Beneficial Owners

Widodo intervened in the airfare pricing of Garuda Indonesia (Persero) (GIAA IJ), compelling it to drop its fares by 20%.  This serves a short-term election interest at the expense of investor confidence.  Ahok joined PDI-P, but only very peripherally.  The contradictory and hypocritical hyperbole in Prabowo’s persistent economic campaign messages still have yet to resonate with voters.  The trade agreement with Australia will happen in March, say ministers.  The KPK is prioritizing measures to disclose beneficial owners of companies. 

Politics: Jakarta Governor Basuki Tjahaja Purnama (‘Ahok’) announced that he had joined the PDI-Perjuangan party of Megawati, but officials made clear that he will not campaign for President Joko Widodo, nor does he have any status in the party other than “member” without rank.  He must work to attain the status of “cadre”.  Nonetheless, Megawati deserves credit for embracing an icon of pluralism and reform (Page 2).  Police named the hard-line Islamic leader Slamet Ma’arif as a suspect on charges of illegal campaigning.  Opposition figures decried this as yet another example of administration repression.  In fact, the charges against the cleric are sound (p. 3).  West Java Governor Ridwan Kamil rebutted accusations of campaign violations (p. 3).  Former First Lady Kristiani Herawati Yudhoyono is suffering from leukemia (p. 5).  Gerindra Chair Prabowo Subianto campaigned in Central Java and expounded on his familiar themes of wayward policymaking and economic deprivation.  Prabowo’s attempt to use hyperbole to excite voters has not worked in the four months of campaigning to date, but he has yet to alter his messaging (p. 5).  Widodo’s campaign team daily chair, Gen (ret) Moeldoko, declared that the strategy for the final 60 days of campaigning will be “total war”.  This elicited ridicule from the opposition (p. 8).  Former Constitutional Court Chief Justice Mahfud Mahmodin called on justices of the court to intervene in the leadership dispute dividing the Regional Representatives Assembly (DPD) (p. 9).  Solidarity Party (PSI) Chair Grace Natalie derided “faux‑nationalist” parties that fail to defend pluralism (p. 9). 

Justice: Anti-Corruption Commission (KPK) officials are prioritizing efforts to bring about better disclosure of the beneficial owners of companies (p. 10).

Policy News: The president prevailed upon the state airline Garuda to cut its domestic airfare after hikes last month.  The move avoids irking certain consumers prior to elections.  But ad hoc interventions by the president impose broad costs on the overall economy, by elevating perceptions of risk and deterring investment (p. 10).  The Islamic Justice Welfare Party (PKS) registered a host of objections to a proposed Bill on Sexual Abuse (p. 11).

International: The signing of the long-awaited Comprehensive Economic Part­nership Agreement (CEPA) with Australia will happen next month, say ministers (p. 11).

Economics: Investment Coordinating Board (BKPM) Chair Tom Lembong reiterated calls for revising the Negative Investment List (DNI) to allow investment in health and education (p. 11).

4. FLASH: UK Parliamentary Theatrics Divorced from Deal

• The government was defeated on a motion reiterating the approach passed on 29 January after Eurosceptics abstained in protest at the implied opposition to no deal. It does not bind the government or show no support for an amended deal.
• A state-dependent backstop break clause remains the most likely outcome, with the probabilities of a deal, no deal, and no Brexit still roughly 55:30:15, in my view. Parliamentary theatrics are not changing the facts on the ground.