Register  
Indonesian inflation falls to 4.25pct
Thursday, 12 April 2012 11:35am

The outlook for oil prices is still the wildcard for the economic outlook across the Asian region, according to the latest market update from Indonesia's Mandiri Investasi.

Adding to the speculation is that central governments are trying to control the amount they spend on fuel subsidies, something made harder by the Indonesian Crude Oil Price that the archipelago nation has to pay being 15% above budget forecasts due to geopolitical tension in the Middle East.

Nonetheless, core inflation in Indonesia this year is down to 4.25%, almost half what it was two years ago notwithstanding it's expected to climb back to 5% by 2013, fuelled by growing economic activity especially in the consumer and property sector that has already lead to import growth slightly outstripping exports.

Mandiri does not, however, expect upward trending inflation to lead to an official interest rate rise although the market is pricing in an increase resulting in bond prices moving down aggressively, they noted.

Mandiri said concerns oil will break through the US$120 per barrel threshold requiring the government to increase its national fuel subsidy and lead to additional inflation is driving the bond price moves, which is in-turn attracting buyers particularly for government rather than corporate bonds and especially from retail investors.

Indonesian corporate bonds remain attractive with average yields of 8.3% based on IDX data, said Mandiri.

"We suggest investors overweight on corporate bonds due to the relatively low yields [of] government bonds in the secondary market [will force] the government [to] be overwhelmingly reliant on foreign investors and Bank Indonesia," they said.

Increasing activity in the Asian bond market, combined with some dampening in the outlook for selected resources, is seeing demand come off for AUD, noting that most Australian government bonds issued are bought by overseas investors and if the choices these buyers have in regional bond markets keep increasing then their unfetted demand for Aussie bonds and consequently the AUD will fall.

Reflecting this, some commentators are already forecasting the AUD to drop back to parity particularly if the carry trade picks reacts to the signals from the pressure the RBA is under to lower rates.

Blogs
Follow the industry experts.
Christopher Page
Christopher Page
Managing Director

It needs to be said, most advisers are great advisers
Emotions are running high among financial advisers and it's not surprising. Over the past year, but especially over the last few weeks ...read more
 
Benjamin Ong
Benjamin Ong
Chief Economist

Reflation, rotation and the taper
'Tis being my final type (drivel, to some gentle readers) for the year, we'll take a look back at the 2013 that was to seek the lessons ... read more
 
Alex Dunnin
Alex Dunnin
Director of Research & Editorial Services

We need leadership, but whose?
What do you call a leader with no followers? Just someone out taking a walk. Financial services is an odd industry sector in that ... read more
News Search   
VideoBrought to you by
Who wants to be a RockStar 2014 Highlights
Count's Chris Mekhail was crowned 2014 Rockstar this year for his soaring rendition of Swedish House Mafia hit 'Don't You Worry Child' at the annual Who wants to be a RockStar event organised by the Finance ... Watch video
Claims Management
Is the industry doing enough to engage employers in relation to their role in the claims process? Comments by: Annette Torrington -CommInsure, Pauline Vamos - Association of Superannuation Funds Australia ... Watch video
MAX 2014 Highlights
The annual MAX forum places all the movers and shakers in financial services when it comes to sales, marketing and distribution. Find out the recipe of those who are taking the lead. Watch the video n ... Watch video
AMP Capital Australian Equity Concentrated Fund
We invite you to watch our latest video program on FSiTV featuring AMP Capital's Co-Head of Australian Fundamental Equities Gian Pandit, as interviewed by Mark Smith, deputy editor of Financial Standard. In ... Watch video
Member Awareness
Lawyer involvement in the claim assessment stage can lead to the member being financially worse off and increases claims administration costs. What can be done to reduce lawyer involvement in the claim ... Watch video
Platinum Asset Management
Reflecting on more than three decades in the industry, Platinum Asset Management managing director Kerr Neilson says one of the changes in the industry has the been the erosion of the information advantage ... Watch video
Get it
Daily
FREE to your inbox, get the Financial Standard Daily Email.
Get the Free
iPad app
Download the Financial Standard iPad app for FREE
Industry
Events
JUL
28
AUG
06
FSC Annual Conference 2014 - Accelerate
13
Equities Forum
14
Alternative Investments 2014 Conference
26
Best Practice Forum: Managed Accounts
SEP
10
Risk and Liquidity Forum
News
Bites

$245 (inc GST) for 1 year
 
 
Copyright © 1992-2014 Rainmaker Group
All material on this site is subject to copyright. All rights reserved. No part of this material may be reproduced, translated, transmitted, framed or stored in a retrieval system for public or private use without the written permission of the publisher.
Link to something IjbxsEIc