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Archive for the ‘Indonesia’ Category

Indonesia: More private equity funds are a’coming

In Emerging markets, Indonesia, Private Equity on 05/03/2012 at 5:19 am

http://www.bloomberg.com/news/2012-01-25/tpg-partner-paves-way-for-newcomers-to-indonesian-private-equity.html.

Also, buyers from Singapore completed the largest number of transactions as Indonesia witnessed a record year for M&A activity.The 12-month M&A activity for Indonesia ended 31 Jan, 2012, saw 78 transactions worth a total of US$9 billion being recorded, with Singapore-based companies completing nine transactions worth US$372 million, according to global risk management company Kroll and M&A intelligence service mergermarket.

The nine transactions completed by Singapore-based buyers were in a diverse range of industries, highlighting the investment potential in Indonesia. Two transactions were in the energy sector, the rest of the deals were in transportation, consumer food, real estate, construction, financial services, internet and e-commerce, and in other services.

Japan was the most prominent country in the South-east Asian nation’s M&A activity in terms of value and volume, with US$1.1 billion across six deals. The largest Japanese transaction of the year was Mitsui Sumitomo Insurance’s US$827 million, 50% stake acquisition in life insurance provider PT Asuransi Jiwa Sinarmas (Sinarmas Life Insurance), according to the report.

Deals by Asia-Pacific buyers accounted for 72% \of Indonesia’s M&A deal count while 28% of bidders were from outside Asia, with US bidders completing the most transactions,

 Indonesia is expected to see continued strong M&A activity, particularly in the technology, media and telecommunications, financial services, energy and mining & utilities sectors.

But there are problems as highlighted by a corporate governance spat: Indonesian tycoons versus Nat Rothschild.

“Investing in emerging markets is always challenging for investors. Indonesia in particular requires deep local insight into the market and potential target companies, as various reforms continue to raise both opportunities and challenges for potential bidders,” said Kroll.

“Many investors interested in Indonesia tend to seek help from local third-party advisers or partners to assist with administrative functions during a transaction. However these intermediaries may not necessarily have sufficient understanding of global anti-corruption legislation. Overlooking such legislation can lead to costly violations for investors in their home markets … investors also need to be aware of other operational pitfalls that may impact their business such as the state of local infrastructure and the integrity of business partners. These risks often vary according to sector.”

Strikes could also be a problem http://www.bbc.co.uk/news/business-17175833 despite the consumer boom.

Its booming economy also masks its problems with politcal governance and corruption. This is what ISEAS* says about the country in its inaugral ASEAN Monitor dated February 2012

Indonesia

Indonesia is in a period defined simultaneously by stasis and stability. It has yet to move into the next phase of its democratic consolidation, and it is unlikely to do so in 2012.

In fact, several indicators suggest an overall deterioration in earlier democratic achievements. First, the country’s judiciary and police are — and most likely will remain — notoriouslyunpredictable in upholding the rule oflaw. Second, large sections of the bureaucracy are in disarray; they will continue to perform poorly for theforeseeable future. Third, Indonesia’s main political parties have fallen increasingly into internal turmoil over positions of influence and finances.

Those problems and frictions are boundto persist in several important parties in the coming months.

Externally, Indonesia is expected continue playing a fairly minor role despite being the dominant power inSoutheast Asia. This is largely because of the strong emphasis on purely domestic political issues. As the next generalelection and the presidential electionapproach in 2014, all of Indonesia’s political parties will become increasinglypreoccupied with preparations for the polls and the selection of candidates. It must be remembered that an anti-porn bill was introduced in 2008, just before the general election the following year.

The coming months will tell if there is to be a similar populist legislative measure to win conservative votes this time. Overall, it is unlikely that Indonesia’s status as a stable yet static democracy will change substantially during 2012.

Key points: The current consumer boom in Indonesia will continue to mask its problems with corruption. And though Indonesia is less likely to be adversely affected by a global economic slowdownthan other regional countries, will global risk aversion stem the investment inflows it has enjoyed in recent years? Read the rest of this entry »

Why investors are bullish on Indonesia

In Indonesia on 15/12/2011 at 5:35 am

The Indonesian stock market was the best performer in emerging Asia in 2009 and 2010 when it was up 87% and 46% respectively. So far this year, it is Asia’s second best performer behind the Philippines’ 2.05% rise. It has risen 1.26%. According to Thomson Reuters StarMine, the market is trading at 13.4 times this year’s projected earnings. Thailand is trading at 11 times, Singapore is at 12 times, the Philippines 12.2, Malaysia at 13.3 and the whole of Asia at 10.9.

Indonesia has one of the fastest growing middle classes in the region – up from 80 million five years ago to 130 million now. That’s more than half of this country’s 240 million strong population. That number is expected to grow. By 2020, many think that Indonesia’s middle class will be wealthier than many in Asia.

Largely insulated from the troubles overseas (but remember that China is a big importer of Indonesian exports like themal coal and palm oil) because of strong domestic demand, economists say Indonesia will see growth rates stay stable or possibly even rise next year, at a time when many in the region are cutting their growth forecasts.

So it is not surprising that Indonesian consumers are feeling far more confident about their prospects than ever before, and they consistently rank as some of the most optimistic in Asia about their economic future.

Even a Rothschild can get screwed in Indonesia

In Corporate governance, Indonesia on 14/12/2011 at 6:46 am

I’m a bull on Indonesia* for all my sins and it hasn’t done me much gd. It is a treacherous place, navigating through opaque regulations, erratic business relationships, changing policies and deeply entrenched corruption.

Nat Rothschild, son of Jacob Rothschild (a semi- retired leading London- based financier), a good dealer-maker and savvy investor has found that out the hard way. He is chairman and a major shareholder of London- listed Bumi plc which  owns a 29% stake in Jakarta- listed Bumi Resources, and 75% of Berau. He wrote in early November a very nasty letter to the CEO of both Bumi compaines (same man), complaining that

—  despite being heavily in debt, Bumi Resources had US$867m of assets that had nothing to do with its core coal business;  and

— these assets were held by “connected parties”.

It seems he has yet to receive an official response.

RElated post:

https://atans1.wordpress.com/2010/12/15/nomura-bullish-on-indonesia/#more-5517

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*Long on Lippo Malls Trust and hoping First Reit’s share price falls so I can buy.

Indonesia: Retail Reit paradise?

In Indonesia, Reits on 30/05/2011 at 5:48 am

There are some interesting Indonesian consumption patterns according to a recent report by Indonesia’s Kresna Securities.

It cited a survey by research firm MARS Indonesia saying that discounts and promotions are able to change 67% and 52% of window shoppers into buyers respectively even though they may not have been interested in buying at first.

‘Indonesian consumers are dominated by shop lovers and lifestyle shoppers, who accounted for 54.5% of total consumption in 20.

In my view, a locally-listed Reit that will benefit from these trends is Lippo-Mapletree Indonesia Retail Trust. It is a Singapore-based real estate investment trust with a diversified portfolio of income producing retail and retail-related properties in Indonesia.

Check it out yrself as I can’t say more. I bot some shares earlier this year.

Head south young S’poreans

In India, Indonesia on 27/05/2011 at 9:25 am

Indonesia is the best place for entrepreneurs to start a business, a BBC survey suggested. The US, Canada, India and Australia are seen as among the next best countries at supporting new businesses.

So head south to Indonesia or Oz, young entrepreneurs.

Citi: Owe it money?

In Banks, Indonesia on 09/04/2011 at 8:52 am

A customer, a politician, who owed 68 million rupiah on his Citigold card, died on March 29 while meeting with bank staff, Gatot Eddy Pramono, head of the South Jakarta Police District. said. Four people are suspected of being involved in the death, he said, Bloomberg reports.

FT reports that three external debt collectors  working for Citi have been detained, and face possible murder charges.

An internal investigation into the death didn’t reveal any physical violence, Citigroup’s Mukhtar said April 5. The bank had been working with the client and had offered to waive as much as 40 percent of the principal amount, he said, Bloomberg reported.

Oil at US$120: Buy M’sia

In Energy, Indonesia, Malaysia on 26/02/2011 at 5:45 am

As Asia’s largest net energy exporter, only Malaysia will benefit significantly from higher energy prices. With crude oil, natural gas and palm oil making up almost 30% of total exports, the country is experiencing a significant positive terms-of-trade shock, says Barclays Capital.

It says US$120 oil would add 3.1 percentage points to  Malaysia’s current account balance as a percentage of GDP, and 0.9 percentage points to Indonesia’s.

In(do)(ia)n bulls: noticed?

In Indonesia, Uncategorized on 14/01/2011 at 5:36 am

Indon mkt is down 8% this yr after doing 46% last yr, one of world’s best.

Reason: investors are worried that authorities are too complacent abt inflation. The Reuters article also tells us that the mkt collapsed in previous bouts of inflation, though the analysts say this time is different (“They would say that, wouldn’t they?)

So might want to curb yr bullishness on all things Indon* on SGX here.

The Indian stock market has fallen more than 7%  from a record high set in November, as investors have grown increasingly concerned about inflation and corruption scandals that have paralyzed the country’s Parliament. The Nifty 50 stock index did close up 1.9 percent on Wednesday, but that came after a six-day losing streak.

I’m still a bull on these countries owning Lippo-Mapletree and Ascendas I (despite it trading above last reported RNAV).

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*I missed buying First Reit. I tot it would trade at 0.71 (theoretical price taking into account massive rights issue) for a while. No hurry to buy. In New Yr it moved to juz above its last reported RNAV of 0.76. Sigh. Penny wise, pound foolish.

HSBC doesn’t think M’sians, Indons and PAP are daft

In Economy, Indonesia, Malaysia on 08/01/2011 at 5:30 am

Malaysia and Indonesia will move into the top 20 list of economies by 2050.

S’pore is doomed unless more FTs are let in.

Daily Telegraph article.

Invest in the neighbourhood in 2011?

In Indonesia, Vietnam on 04/01/2011 at 5:23 am

Seems sophisticated investors are looking beyond the ‘BRIC’ countries (Brazil, Russia, India and China). I’ve seen predictions that by 2020, the “Future 7” (F7) countries (Argentina, Egypt, Indonesia, Mexico, South Africa, Turkey and Vietnam) will account for 1-in-10 global consumers, and per capita disposable income will rise by 52% in real terms. The F7 are characterised by youth and urbanised populations, combined with rising incomes and the expansion of the middle class.

Well two of them are neighbours: Indonesia and Vietnam.

Lippo-Mapletree Reit, First Reit,  Berlian Laju and Samudera are Indon plays listed on SGX.

There is one Vietnam play, Latitude.

On you can invest via an EFT listed here.

Go do yr homework. You might make money without investing on a foreign exchange.

BTW I got some Lippo-Mapletree.

Keep calm, carry on — No need to rant against Temasek

In Indonesia, Temasek, Uncategorized on 23/12/2010 at 5:27 am

Or write stories defending it.

This story, abt the possibility of the Indon authorities seizing Temasek’s assets there, is nothing to get excited about. Someone wants some money. Remember its Money time!

This blogger is bullish on Indonesian. But he has been around long enough to know that Indonesia’s ideas of good governance (public or private) is not benchmarked to global standards. It is uniquely Javanese.

A few years back, a foreign investor was involved in a dispute with the management of a listco. An EGM was called, and the investor’s resolution won the support of the majority of shareholders in a poll vetted by a major international accounting firm.

The next day, the investor read in the papers that he had lost, and management had won, the vote. When he sought an explanation, he was told, “The counters made a mistake”.

A senior US foreign service officer who was based in Indonesia once told me that Indonesian officials had demanded a bribe from him to process an application even though they knew he was a member of the US embassy there. The embassy raised the issue and were told, “Err misunderstanding brudder”. Still, by the time he left for another posting a few years later, his application was being processed.

So now that Temasek has asked the court if a judgement has been issued, sumeone will say, “You mean you never got it? We posted it months ago. We have sent another copy in the mail.”

BTW, S$13m is “peanuts” as Mrs SM could have put it, but didn’t.

Nomura: Bullish on Indonesia

In Commodities, Energy, Indonesia on 15/12/2010 at 5:11 am

Nomura says Indonesia’s fundamentals are solid. Growth is strong, inflation is muted, and the central bank aims to keep the rupiah stable. And the government aims to kick-start infrastructure projects by making land acquisition easier.

So GDP growth is expected to grow from an estimated 5.9% this year to 7% next year. Nomura sees a 15 times PE for the equity market next year, with a possible re-rating to as much as 16.5 times PE.

The firm’s top stock picks in Indonesia are infrastructure providers. Commodity companies are also expected to do well. Coal prices are rising even as production volumes improve. A return to normal weather conditions will also boost Read the rest of this entry »

The case for Indonesia: incompetency notwithstanding

In Indonesia on 22/10/2010 at 5:39 am

I’m sure we are all upset that the #$%^ Indons are at it again: promising yr after yr to control forest fires while doing nothing. And there are riots

But as FT’s Lex reports today To say that Indonesia has outperformed would be an understatement. A thousand dollars invested in the MSCI Asia ex-Japan index 10 years ago would be worth about $3,600 now, with dividends reinvested. The same sum invested in the Jakarta Composite would have grown to almost $13,000. $=US$

Indonesia’s core investment case remains compelling. Bigger than Brazil in population, and with a fractionally younger median age, Indonesia resembles India in the composition of its growth: powered not by net exports – just 1 per cent of gross domestic product in the first half – but by consumption and fixed capital formation. As it had no demand shock from which to recover, Indonesia may be one of a handful of regional economies to see gross domestic product growth accelerate next year.

True Foreigners sold a net $148m of Indonesian stocks on Tuesday, the biggest net sale in eight months, as police prepared the razor wire.

But even at near-record high valuations – Jakarta’s price/book ratio of 3.5 times is not far from the 3.8 it hit almost three years ago – this remains a tough market to underweight. Oligopolies in the consumer, financial, utility and resources sectors mean that aggregate returns on equity are Asia’s highest.  They will almost certainly be back.

Our neighbour Indonesia

In Indonesia on 30/09/2010 at 5:51 am

Jakarta Composite Index had another record day yesterday, rising 0.7%, close to the  3,500 level and breaking fresh records for a fourth successive day.

On Monday, the index was up 2.1% , on volume of 7bn shares worthUS$699m changing hands. Indonesia’s buoyant economy and a rise in consumer spending are attracting investors, particularly foreigners.

Related post: trumpets pls.

https://atans1.wordpress.com/2010/03/20/our-neighbour-the-new-brazil/

Indonesia: Value investor bullish

In Emerging markets, Indonesia on 07/06/2010 at 5:17 am

Obama did it again. The  “Canceller-in-chief”,  has again postponed  his trip to Indonesia.  If I were an Ondonesian, I’d be upset. Waz so difficult abt vistiing the Gulf, do a tv special, explain that you have already postponed one trip to Indonesia,  https://atans1.wordpress.com/2010/03/20/our-neighbour-the-new-brazil/, and that a second postponement is an insult to the the new Brazil?

And Indonesia is impt — Mark Mobius says so.

Indonesia has a “good” outlook due to its resources and large population, putting the nation in a favorable position to attract investment, Templeton Asset Management Ltd.’s Mark Mobius said.

“Overall we have a positive take on investment opportunities there,” Mobius, who oversees about $34 billion in emerging markets as Templeton Asset Management’s Singapore-based executive chairman, wrote in his blog dated yesterday. “Indonesia has a young, growing population and Jakarta, the capital of Indonesia, is expected to be the largest city in the world within two decades.”

Full article from Bloomberg.

Just when you tot it was safe

In China, Economy, Emerging markets, India, Indonesia on 29/04/2010 at 5:18 am

Thinking of starting to  invest seriously in emerging markets? Standard Chartered warns of bubble in emerging markets. Extract from Guardian article:

Gerard Lyons, chief economist at Standard Chartered, said Asia was the main recipient of western capital, but there was also evidence of speculative activity in Latin America, Eastern Europe and Africa.

A combination of a prolonged period of low interest rates in the west and strong growth in emerging markets meant the money would continue to flow in. “The size of the flows could become more significant,” he added. “There is a significant risk, even though it is a consequence of economic success.”

The report noted that many countries did not have the capacity to absorb the capital inflows, with the result that the money boosted share and property prices, adding to inflationary pressures.

“The longer it takes to address this, the bigger the problem will be. Just as excess liquidity contributed to problems in the western developed economies ahead of the financial crisis, excess liquidity has the potential to cause fresh economic and financial problems across the emerging world.”

Massive flows of capital from emerging economies, especially those in Asia, helped to inflate the asset bubbles in the west that led to the financial crash of 2007. Standard Chartered said global liquidity flows had now reversed, with emerging economies now on the receiving end. Recipients included countries with current account surpluses such as China, and those running current account deficits such as Vietnam and India.

Lyons said China was the emerging economy investors were looking at for signs of trouble. “China is not a bubble economy but it is an economy with bubbles.” But he added that the problem was not confined to Asia, and that hedge funds were now looking at “frontier markets” in Africa.

While emerging markets needed foreign direct investment to help them grow, Standard Chartered said the influx of hot money was a big worry. “Although hot money is regarded as temporary, it persists until the incentive to speculate is eliminated.”

Oh and there is the Greek crisis. 2008, here we come again?

Oil: Neither too hot nor too cold

In Economy, Indonesia, Temasek on 01/04/2010 at 7:22 am

Juz like Goldilock’s porridge.

Since August last year, oil prices have stabilised in the US$70 to US$83 range and according to this NYT articleEconomists and government officials say that if prices remain in that band, it could benefit the world economy, the future security of energy supplies and even the environment. The price is high enough to drive investment in future oil production and in supplies of alternative energy, they note, but low enough that consumers can bear it.

“It’s a sweet spot,” said Kenneth S. Rogoff, a Harvard professor of international finance. “It’s not too low that it’s crushing demand for renewable energy sources or causing debt and fiscal crises in oil-exporting countries. And it’s not so high that it’s driving African countries deeper into poverty and threatening the recovery in the U.S. and Europe.”

So for us value investors, the issue is avoiding being complacent because, For all the good that stable prices can do, however, no one is willing to predict they will last forever.

“Demand will change; supply will change,” said Christof Rühl, chief economist of BP, the oil company. “The world changes all the time.”

BTW looks like Temasek goofed in selling Orchard Energy

https://atans1.wordpress.com/2009/12/09/time-to-load-up-on-oil-connected-stocks/

But the buyer, RH Petrogas, is having difficulties completing the deal because the Indonesian authorities are insisting a transfer of an oil interest needs their approval.

DBS: What the new chairman should be looking at II

In Banks, China, Corporate governance, India, Indonesia on 30/03/2010 at 6:04 am

He should ensure that any acquisition in Indonesia, India, Malaysia and Thailand,  the countries where DBS says it would look for acquisition opportunities is disciplined in terms of valuation, strategic fit and execution.  Investors still remember the Dao Heng fiasco, overpaying and having to take billion dollar impairement charge. And the purchase of POSB was not such a gd deal as anti-government subversives like to imply that it is.

Better still he shld relook at the rationale for these M&A activities.

DBS is  Singapore and Hong Kong centric. But, in February, it said it was aiming to have 30 per cent of its revenue from South and South-east Asia, excluding Singapore, 30 per cent from Greater China and 40 per cent from Singapore within five years.

Morgan Stanley estimates that DBS would have to grow at a compounded annual growth rate of 40 per cent a year in South and South-east Asia to achieve its stated target in that region i.e. it would have to grow via acquisitions.

BTW last Friday BT reported that DBS’s CEO had said DBS had identified unnamed acquisition targets in Indonesia which shld worry investors.

Previous post on topic

https://atans1.wordpress.com/2010/03/24/dbs-what-the-new-chairman-shld-be-looking-at/

He shld be relooking at FT policy — both in principle and execution.

New SGX ETFs for Indon and China exposure

In China, Economy, ETFs, Indonesia on 22/03/2010 at 5:21 am

Investors can now gain exposure to shares listed on the Indonesia stock exchange and on the Shanghai and Shenzhen exchanges.

Two Mondays ago, db x-trackers listed an  ETF tracking the MSCI Indonesia index on SGX. The ETF is Ucits III compliant. This means it is a product  that can be sold to EU retail investors because it meets European regulatory requirements on risk management and operational procedures.

It has also launched an ETF on  CSI 300, an index of leading Chinese stocks. This is also Ucits III compliant.

db x-trackers says its  management fee is only 0.5%.

db x-trackers must be concerned abt the liquidity of these new ETFs because it took out an ad in ST telling people abt these products last friday.

Our neighbour, the new Brazil?

In Indonesia on 20/03/2010 at 5:24 pm

While Singaporeans (government and people and MSM) are looking to China and India as drivers for growth, we may be ignoring  the new Brazil on our doorstep.

Obama’s trip to Indonesia scheduled this weekend (and now delayed until June because he needs to twist arms over the healthcare bill) was being hailed by the governments of Indonesia and the US ” as a momentous opportunity to cement their relationship on security, trade and military issues”.  More to the point, Indonesia is South East Asia’s largest economy and growing (it was one of the few countries including China and Brazil that had +ve growth in 2009): meaning American firms want to come in.

So keen are the Americans and others to do business that the Indonesia’s political situation are glossed out, or given an optimistic spin.

“The Indonesian parliament voted to pursue a criminal investigation of the vice-president and finance minister, both pro-market reformists, in connection with a bank bail-out in November 2008. Given that the campaign to investigate was led by tycoon Aburizal Bakrie – whose group was denied a government bail-out weeks earlier – …. the kind of  stuff used to send investors scurrying back to core holdings, ” FT reported sometime back.

“Political unrest, after all, might threaten President Susilo Bambang Yudhoyono’s programme of fiscal and institutional reforms, lengthening the odds on a Brazil-style scenario of stronger currency, more moderate inflation and booming consumption that would lift the country to investment-grade status. But the results of the vote did not weigh one bit on asset prices on Thursday.”

Equity portfolio inflows have been as strong as that of any other emerging economy. “The rupiah is the eighth best-performing of 26 emerging market currencies this year, having ranked fourth last year,” FT reported.

Looks like investors have faith in the long term prospects of Indonesia and will take things like demonstrations, corruption, and bomb blasts in their stride.

“The country now has many of the hallmarks of stability that mature markets lack: strong real growth, a relatively contained and modest budget deficit, increasing foreign direct investment and rising foreign exchange reserves. ”

Let’s hope so. After all Indonesia, like Argentina and Brazil, until recently, have been always countries of the future. But it never happened because of bad government. Indonesia could still turn out to be another Argentina. And note that I was a bull on Indonesia. A bull that in the 1998 crisis, had his balls crushed.

And let’s hope S’pore can manage its ties with this prickly neighbour to our mutual advantage. But I’m not a “S’pore is always wrong” S’porean, blaming everything on our government. The Indonesian army has form in bullying its people and invading neighbours: Aceh, Sulawesi, East Timor, West Papua, Malaysia.  Remember the Indonesian army planted bombs here in the 1960s?

But then remember the golden age for S’pore was in the late 70s, and 80s when Indonesia was booming under MM’s mate, Suharto. Whatever one may think of both men, they were pragmatists to the mutual advantage of both countries, minor problems notwithstanding.

BTW, the coming week’s posts will have a regional theme.