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Business Times
16-07-2025
- Business
- Business Times
Indonesia's central bank cuts benchmark rate by 25 basis points to 5.25%
[JAKARTA] Indonesia's central bank cut its benchmark interest rate for the third time this year, shortly after the country finalised a trade deal with the US that sets a 19 per cent tariff on goods from South-east Asia's largest economy. Bank Indonesia (BI) on Wednesday (Jul 16) lowered its benchmark rate by 25 basis points to 5.25 per cent, aligning with market consensus compiled by Reuters. It also reduced its overnight deposit and lending facility rates to 4.5 per cent and 6 per cent, respectively. BI governor Perry Warjiyo said the decision was driven by low inflation – which remained within the target range – and the continued stability of the rupiah, in line with its fundamentals as well as the ongoing need to support economic growth. Inflation in June stayed near the bottom of the central bank's target range of 1.5 to 3.5 per cent. Warjiyo also expressed support for the recently concluded trade agreement, saying it would boost sentiment for Indonesia's exports and economic growth, while providing greater clarity for financial markets. BI estimates Indonesia's gross domestic product growth will reach 5 per cent this year, slightly below the target of 5.2 per cent. The rupiah slipped 0.1 per cent to 16,278 against the US dollar on Wednesday, while the Jakarta Composite Index maintained its upward momentum after the tariff deal was sealed, gaining 0.72 per cent at the close. A NEWSLETTER FOR YOU Friday, 8.30 am Asean Business Business insights centering on South-east Asia's fast-growing economies. Sign Up Sign Up Analysts said that BI may keep the door open for further rate cuts later this year, as it aims to bolster growth amid mounting global uncertainties and signs of slowing domestic demand. Indonesia's economy is under mounting pressure from weakening consumption – a crucial growth driver, as evidenced by a decline in retail sales during the second quarter of this year. Lavanya Venkateswaran, Asean economist at OCBC, said the rate cut was broadly expected and reflects BI's continued focus on sustaining growth momentum amid rising global and domestic headwinds. OCBC projects Indonesia's GDP growth to moderate to 4.7 per cent in 2025 from 5 per cent in 2024, amid weaker external demand and slowing domestic consumption. 'BI clearly left the door open for further cuts, the timing of which will be tied to rupiah stability,' Venkateswaran added. On Tuesday, US President Donald Trump announced the completion of a trade deal with Indonesia, under which Indonesian goods will face a reduced tariff of 19 per cent – down from the previously threatened 32 per cent – while US exports will be exempt from any levies. Indonesia became the fourth country to clinch a pact with the US, after the UK, Vietnam and China – though Beijing's agreement with Washington remains a truce. South-east Asia's largest economy reportedly committed to purchasing US$15 billion in US energy exports and US$4.5 billion in agricultural goods, alongside increasing its orders for Boeing aircraft. While uncertainty surrounding Trade War 2.0 has begun to ease, supported by the latest trade deal, Permata Bank chief economist Josua Pardede cautioned that questions remain about the future direction of the Federal Reserve's policy rate. This is especially as Trump's tariff strategy could further intensify inflationary pressures in the US. In the near term, these factors may dampen capital inflows to riskier emerging market assets, including Indonesia, potentially curbing the rupiah's recent gains. 'As a result, BI may take a more cautious approach before pursuing further aggressive rate cuts,' Pardede said, adding that there was still room for the central bank to cut rates by an additional 25 to 50 basis points over the remainder of the year.
New Straits Times
16-07-2025
- Business
- New Straits Times
US trade deal boosts Jakarta stocks, rupiah slips ahead of rate decision
JAKARTA: Indonesian equities climbed to their highest in a month on Wednesday after Jakarta negotiated more favourable trade tariffs with Washington, while the local currency slipped ahead of an interest rate decision by the central bank. The rupiah slipped over 0.1 per cent, while the benchmark Jakarta Composite Index rose as much as 0.8 per cent to its highest lsince mid-June before paring some gains. Shares of Bank Mandiri, one of the country's largest lenders, climbed as much as 1.3 per cent. Washington on Tuesday confirmed it had reached a tariff deal with Indonesia, setting duties at 19 per cent on goods imported from Southeast Asia's biggest economy — well below the previously threatened 32 per cent. It is also lower than the steeper levies proposed for neighbouring countries, including 25 per cent on Malaysia and 36 per cent on Thailand. The news buoyed sentiment ahead of a policy meeting by Bank Indonesia later in the day, though the market remained split on the likely outcome. Bank Indonesia has eased monetary policy twice this year but stood pat at its meeting in June. "It's a close call," said Radhika Rao, senior economist at DBS, who expects the central bank to keep interest rates steady. "The overnight conclusion of the trade deal will be positive for IDR-denominated assets, increasing the possibility that BI (Bank Indonesia) might lean into its dovish bias today." Yet, caution prevails as traders remain all too aware of US President Donald Trump's ever-shifting stance on tariffs. He has often backtracked, altered tariffs rates and timelines, and threatened higher levies since first introducing higher reciprocal tariffs on April 2. Meanwhile, broader emerging Asian currencies were under pressure after the latest US inflation data suggested tariffs were feeding into consumer prices, pushing the dollar to a 15-week high, prompting investors to scale back their monetary easing bets. US Treasury yields climbed to multi-week peaks after the modest rise in June inflation, lifting the dollar index against a bunch of currencies. Eugene Leow, a senior rates strategist with DBS, said market participants were starting to get uncomfortable about the mix of events with US stock indexes and dollar taking note of the jump in yields. The Philippine peso and Thai baht were among the biggest losers, each falling around 0.3 per cent, while the Taiwan dollar also lost ground. In equity markets, Malaysia's Kuala Lumpur index fell 0.3 per cent, Seoul's benchmark declined 0.6 per cent, and Manila stocks dropped 1.6 per cent to its lowest level since late June. Bucking the regional trend, Singapore's Straits Times Index extended its rally, setting a record for the 11th consecutive day, while Taipei's benchmark climbed roughly 1 per cent to reach its highest level since late February.
The Diplomat
10-07-2025
- Business
- The Diplomat
Jakarta-Riyadh Convergence: Prabowo's Saudi Outreach and the Pursuit of Foreign Investment
Last week, Indonesian President Prabowo Subianto visited Jeddah, marking his first official visit to Saudi Arabia since taking office in October 2024. The visit comes against the backdrop of Prabowo's attempts to increase foreign investments, especially from the Gulf states, as part of a broader strategy to boost economic growth in Indonesia. During the recent visit, Prabowo met Saudi Crown Prince Mohammed bin Salman and discussed mechanisms to strengthen bilateral ties and bolster cooperation across key sectors. The bilateral trade between both countries has grown steadily in recent years, and Indonesia remains one of the largest trading partners of Saudi Arabia in Southeast Asia. Moreover, the overall trade between the Gulf Cooperation Council (GCC) and ASEAN has also grown in recent years, reaching $123 billion, constituting about 8 percent of the GCC's total trade. Saudi Arabia's trade dynamics with ASEAN are dominated by energy and petrochemicals, and Riyadh intends to increase the potential for cooperation and investments in non-oil sectors in which Indonesia features prominently. Indonesia's economy has maintained steady growth in recent years under the former President Joko Widodo. Jokowi's tenure was characterized by an infrastructure push and an ambitious vision of economic transformation aimed at turning Indonesia into a regional manufacturing and investment hub. Prabowo rallied support during his campaign and came to power promising economic growth, reducing unemployment and poverty rates, and increasing public welfare initiatives. While Prabowo seeks to continue Indonesia's development trajectory, his policies mark a shift toward expansive social spending and a more populist approach, which has been criticized by the opposition and has raised concerns, especially regarding his ambitious $28 billion Free Nutritious Meal Program. Reports indicate that investors are anxious about the current economic trends as the Jakarta Composite Index dropped by over 10 percent since Prabowo took office, while the rupiah has weakened by 7 percent against the U.S. dollar. However, Prabowo remains confident about his target of achieving 8 percent growth by 2029, for which foreign investments into the country will be critical. During Prabowo's recent visit, Indonesia and Saudi Arabia signed deals worth around $27 billion, focusing on clean energy, petrochemicals, and mineral resources. Both countries also established a Supreme Coordination Council — an important step toward identifying new areas of collaboration and advancing efforts to enhance and diversify bilateral cooperation, particularly through joint initiatives in trade, energy, infrastructure, and strategic investments. Saudi Arabia's ACWA Power signed preliminary agreements with Indonesia's new sovereign wealth fund, Danantara Indonesia, and state energy firm Pertamina to explore renewable energy projects worth up to $10 billion. Indonesia and the Gulf Cooperation Council (GCC) had earlier officially launched free trade agreement (FTA) negotiations, with the first round scheduled for September 2025. This is a part of the wider trend between ASEAN and GCC countries to strengthen their economic ties. During the 2nd ASEAN-GCC Summit in Kuala Lumpur in May 2025, a joint declaration was adopted to deepen ties across transport, food security, and sustainable development. For Jakarta, this offers an avenue not only to expand market access but also to position itself as the bridge between Southeast Asia and the Gulf. Converging interests in energy, technology, AI, halal food business, and Islamic finance further anchor this cooperation. For Saudi Arabia, expanding investments in Southeast Asia, particularly in Indonesia, aligns with its Vision 2030 objective of diversifying away from traditional Western markets and expanding its economic and political footprint in Asia. Indonesia, as the largest economy and most populous nation in ASEAN, also holds substantial geopolitical weight, making it an increasingly valuable partner for Riyadh. Both countries also hold significant influence in the Islamic world — Indonesia as the largest Muslim-majority nation, and Saudi Arabia as the custodian of Islam's holiest sites. Indonesia sends the highest number of Hajj pilgrims annually, making the logistics, healthcare, and spiritual preparation a massive effort that demands strong bilateral coordination, especially amid recent challenges, such as the abrupt visa suspension and coordination lapses that left many pilgrims stranded. Moreover, both countries share aligned perspectives on key regional and global issues, and during the recent visit, both leaders emphasized their mutual concern for the Palestinian cause, echoing ASEAN's recent statement in support of Palestinian self-determination and a two-state solution. In the current circumstances, Indonesia faces external risks in maintaining economic growth momentum, especially with U.S. President Donald Trump's transactional approach toward the region and trade matters. The Trump administration threatened steep 'reciprocal' tariffs, and Indonesia filed a second proposal to the U.S. to avert the possibility of a hefty tariff. Nevertheless, on July 7, the Trump administration sent a letter stating that tariffs for Indonesia would be raised to 32 percent as of August 1. As part of its efforts to reduce the trade surplus with the U.S. and ease bilateral tensions, Indonesia is planning to ramp up imports of American crude and LPG, aimed at both narrowing the trade gap and diversifying its energy basket. This shift could gradually lessen Indonesia's dependence on Middle Eastern imports. Amid growing concerns over tariffs and their impact on domestic markets, Jakarta must strengthen ties with other major powers that offer long-term investment potential and align with its strategic interests. In this context, Gulf powers have become increasingly relevant as they have, in recent years, increasingly looked at Asian markets for strategic investments, seeking to position themselves within this broader landscape of diversified economic partnerships. Indonesia is deepening its cooperation with Gulf countries beyond traditional energy ties, pivoting toward non-oil sectors that align with both nations' national development agendas and domestic reform priorities. Both Saudi Arabia and Indonesia have carefully calibrated their foreign policies to avoid provoking the U.S. while insulating themselves from the unpredictability of the Trump administration, all while maintaining a balanced approach toward other major powers. This delicate balancing act, particularly in the context of evolving ASEAN-GCC-China trilateral dynamics, reflects Jakarta's broader objective: to safeguard its economic future from great power volatility while asserting itself more confidently in the growing space for middle-power diplomacy. The growing synergy between Jakarta and Riyadh reflects not only economic alignment but also a stronger convergence in navigating the evolving global order, including shared positions on key issues in the Islamic world.
Business Times
09-07-2025
- Business
- Business Times
Indonesia's Chandra Daya jumps 35% following 2.4 trillion rupiah million IPO
[JAKARTA] Chandra Daya Investasi shares surged as much as 35 per cent in their first day of trading in Jakarta, hitting the daily limit, on optimism they will follow the stellar gains made by other companies linked with billionaire Prajogo Pangestu. The infrastructure unit of petrochemical giant Chandra Asri Pacific climbed as high as 256 rupiah early on Wednesday (Jul 9), versus the price of 190 rupiah in its initial public offering (IPO). The Jakarta Composite Index rose 0.3 per cent. Chandra Daya raised 2.4 trillion rupiah (S$189 million) in its IPO, the largest in Indonesia this year. Investors submitted bids for more than 560 times the amount of shares on offer, demonstrating the appeal of firms associated with Pangestu. His coal-producing unit Petrindo Jaya Kreasi has jumped more than 5,000 per cent since it listed in 2023, while Barito Renewables Energy has climbed more than 600 per cent since its debut the same year. 'Chandra Daya's IPO oversubscription is possibly the highest in the history of the bourse,' said Fransiskus Ruly Aryawan, the company's president director. The first-day jump in Chandra Daya came despite concerns over global trade frictions caused by the higher tariffs threatened by US President Donald Trump. Indonesia is seeking to negotiate with the US, saying there's still a chance to bring down the 32 per cent tariff Trump plans to impose on Aug 1. Chandra Daya's projects include energy, water, logistics and ports and warehousing. The company plans to use the proceeds from its share sale to develop and expand its main infrastructure businesses by acquiring ships and funding ports and warehouse operations. Indonesia's stock market has seen 18 IPOs this year, raising a total of US$609 million. BLOOMBERG
Business Times
22-05-2025
- Business
- Business Times
Singapore shares slide in tandem with regional bourses and Wall Street; STI drops 0.1%
[SINGAPORE] Asian bourses, including Singapore's, were largely in the red on Thursday (May 22) after a Wall Street sell-off overnight. This came as the US' fiscal uncertainty soured market sentiment. Singapore's Straits Times Index (STI) slid 2.46 points or 0.1 per cent to 3,880.09 points, which was relatively muted when compared with its regional peers' declines ranging from 0.2 to 1.2 per cent. The exception was Jakarta Composite Index, which bucked the trend to close up 0.3 per cent. Liechtenstein-based private banking and asset management group LGT commented that the tepid demand for a US$16 billion of 20-year US bonds resulting in higher yields reflected investor concern over America's rising debt and fiscal situation. The Congress tax and spending bill – if passed and expected to raise the nation's US$36.2 trillion debts – as well as the downgrade of the US sovereign credit rating from Moody's last Friday put equity markets under pressure. Stephen Innes, managing partner of SPI Asset Management, pointed out that the high yields make it more difficult to justify today's stretched equity valuations, and the earlier rally fuelled by the tariff detente could be capped. Decliners hammered gainers 288 to 178 across the broader Singapore market, with 1.1 billion of securities valued at S$1.4 billion in total were transacted. Singte l closed at a 52-week high of $3.95 – up S$0.10 or 2.6 per cent – after the telco posted S$2.8 billion in net profit for the second half of the financial year ended March, and announced a shares repurchase of up to S$2 billion. The counter was also the most traded stock with a transaction volume of 52.3 million, and the top performing STI stock. Meanwhile, Japan Foods shares hit a 52-week low at S$0.21, after sliding down S$0.01 or 4.6 per cent. The Catalist-listed restaurant player with Ajisen Ramen being its flagship brand had earlier flagged substantial red ink for the financial year ended March.
