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IATA forecasts passenger demand to double over 20 years

Photo by IATA

JAKARTA (TheInsiderStories) – The International Air Transport Association (IATA) expects 7.2 billion passengers to travel in 2035, a near doubling of the 3.8 billion air travelers in 2016. The prediction is based on a 3.7% annual Compound Average Growth Rate (CAGR) noted in the release of the latest update to the association’s 20-YearAir Passenger Forecast.

“People want to fly. Demand for air travel over the next two decades is set to double. Enabling people and nations to trade, explore, and share the benefits of innovation and economic prosperity makes our world a better place,” said Alexandre de Juniac, IATA’s Director General and CEO.

Eastward shift, developing market focus

The forecast for passenger growth confirms that the biggest driver of demand will be the Asia-Pacific region. It is expected to be the source of more than half the new passengers over the next 20 years. China will displace the US as the world’s largest aviation market (defined by traffic to, from and within the country) around 2029.

India will displace the UK for third place in 2026, while Indonesia enters the top ten at the expense of Italy. Growth will also increasingly be driven within developing markets. Over the past decade the developing world’s share of total passenger traffic has risen from 24% to nearly 40%, and this trend is set to continue.

(Click on the graph to see it in full size)

Risks, Challenges and Opportunities

The 20-year forecast puts forward three scenarios. The central scenario foresees a doubling of passengers with a 3.7% annual CAGR. If trade liberalization gathers pace, demand could triple the 2015 level. Conversely, if the current trend towards trade protectionism gathers strength, growth could cool to 2.5% annual CAGR which would see passenger numbers reach 5.8 billion by 2035.

“Economic growth is the only durable solution for the world’s current economic woes. Yet we see governments raising barriers to trade rather than making it easier. If this continues in the long-term, it will mean slower growth and the world will be poorer for it. For aviation, the protectionist scenario could see growth slowing to as low as 2.5% annually. Not only will that mean fewer new aviation jobs, it will mean that instead of 7.2 billion travelers in 2035, we will have 5.8 billion. The economic impact of that will be broad and hard-felt,” said de Juniac.

Whatever scenario is eventually realized, growth will put pressure on infrastructure that is already struggling to cope with demand.  “Runways, terminals, security and baggage systems, air traffic control, and a whole raft of other elements need to be expanded to be ready for the growing number of flyers. It cannot be done by the industry alone. Planning for change requires governments, communities and the industry working together in partnership,” said de Juniac.

The industry will also need to be able to grow sustainably. Earlier this month airlines supported the establishment of a Carbon Offset and Reduction Scheme for International Aviation (CORSIA). This landmark agreement—the first among governments to manage the emissions growth of an entire global industrial sector—aims to cap net emissions with carbon neutral growth from 2020. “Aviation is at the forefront of industries in managing its carbon footprint. Along with offsetting emissions through CORSIA, airlines are working with partners in industry and government to advance technology, improve operations and generate more efficiencies in infrastructure,” said de Juniac.

Key facts (all figures based on central growth forecast)

Fast-growing markets

The five fastest-growing markets in terms of additional passengers per year over the forecast period will be

  • China (817 million new passengers for a total of 1.3 billion)
  • US (484 million new passengers for a total of 1.1 billion)
  • India (322 million new passengers for a total of 442 million)
  • Indonesia (135 million new passengers for a total of 242 million)
  • Vietnam (112 million new passengers for a total of 150 million).

The top ten fastest-growing markets in percentage terms will be in Africa: Sierra Leone, Guinea, Central African Republic, Benin, Mali, Rwanda, Togo, Uganda, Zambia and Madagascar. Each of these markets is expected to grow by more than 8% each year on average over the next 20 years, doubling in size each decade.

Regional growth

  • Routes to, from and within Asia-Pacific will see an extra 1.8 billion annual passengers by 2035, for an overall market size of 3.1 billion. Its annual average growth rate of 4.7% will be the second-highest, behind the Middle East
  • The North American region will grow by 2.8% annually and in 2035 will carry a total of 1.3 billion passengers, an additional 536 million passengers per year
  • Europe will have the slowest growth rate, 2.5%, but will still add an additional 570 million passengers a year. The total market will be 1.5 billion passengers
  • Latin American markets will grow by 3.8%, serving a total of 658 million passengers, an additional 345 million passengers annually compared to today
  • The Middle East will grow strongly (5.0%) and will see an extra 258 million passengers a year on routes to, from and within the region by 2035. The UAE, Qatar and Saudi Arabia will all enjoy strong growth of 6.3%, 4.7%, and 4.1% respectively. The total market size will be 414 million passengers
  • Africa will grow by 5.1%. By 2035 it will see an extra 192 million passengers a year for a total market of 303 million passengers



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IATA forecasts passenger demand to double over 20 years

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ECB decided rates remained unchanged, open to lower levels in coming months

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JAKARTA (TheInsiderStories) – Governing Council of the European Central Bank (ECB) decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.40% respectively.

The Governing Council continues to expect the key ECB interest rates to remain at present or lower levels for an extended period of time, and well past the horizon of the net asset purchases.

“Rates expected to stay at present or lower levels for an extended period of time, well past horizon of asset purchases,” President of ECB Mario Draghi said in press statement.

Regarding non-standard monetary policy measures, the Governing Council confirms that the monthly asset purchases of €80 billion are intended to run until the end of March 2017, or beyond, if necessary, and in any case until it sees a sustained adjustment in the path of inflation consistent with its inflation aim.

Draghi added, Euro are continues to show resilience to adverse effects of global economy and political uncertainty. ECB, He continues, remain committed to preserving the very substantial degree of monetary accommodation.
“We will continue to act if warranted by using all instruments available within our mandate,” He stated.
Inflation, Draghi explained, likely to pick up in next months, mostly due to base effects and there is no signs yet of convicing uptrend in underlying inflation. At the end, He urged, the implementation of structural reforms need to be substantially stepped up in all euro area countries.

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ECB decided rates remained unchanged, open to lower levels in coming months

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BI cuts BI 7-day RR Rate by 25 bps to 4.75%


JAKARTA (TheInsiderStories) – Bank Indonesia Board of Governors Meeting on 19-20 October 2016 decided to lower the BI 7-day Reverse Repo Rate (BI 7-day RR Rate) by 25 bps from 5.00% to 4.75%, with interest rates Deposit Facility dropped by 25 bps to 4.00% and Lending Facility fell by 25 bps to 5.50%, effective from October 21, 2016, said the executive director Tirta Segara.

Bank Indonesia believes that the easing of monetary policy is in line with the subdued levels of macroeconomic stability, especially inflation in 2016 is expected to approach the lower limit of the target range, the current account deficit a better-than-expected balance of payments surplus is larger, and the exchange rate relatively stable.

In the midst of the still weak global economy, monetary policy easing is believed to further strengthen efforts to boost domestic demand, including demand for credit, so that it can continue to encourage the economic growth momentum.

Bank Indonesia will continue to strengthen policy coordination with the Government to ensure control of inflation, the strengthening of growth stimulus, and the implementation of structural reforms goes well, be able to support sustainable economic growth.

The global economic recovery is still slow and uneven. The US economy is expected to grow less than previously projected, while Europe and India is expected to grow higher than previous estimates.

The forecast US economic growth was reflected in lower consumption indicator is not solid and the estimated investment is still contracting. Correspondingly, the Fed Funds Rate (FFR) is expected to rise only once in 2016.The improved European employment condition has pushed up consumer income.

On the other hand, the consumption in India is expected to increase supported by rising incomes. In the commodity markets, world oil prices are still at a low level, in line with the high OPEC oil production. Meanwhile, the majority of Indonesia’s export commodity prices have improved, such as coal, crude palm oil and some minerals.

Indonesia’s economic growth in the third quarter of 2016 are likely not as strong as previously expected. Consumption indicated improved, though still limited. On the other hand, improvement of private investment, particularly non-construction, estimated to still strong, in line with an installed capacity is still quite large.

Meanwhile, fiscal stimulus is expected to remain limited, in line with the adjustment of government spending in the second half of 2016. On the external side, the weak economy and world trade resulted in improvements in real exports are still stuck, although prices for some export commodities began to improve.

With these developments, the overall economic growth for 2016 is estimated to tend to approach the lower limit of the range of 4.9 to 5.3% (yoy), Bank Indonsia said.

Indonesia’s balance of payments is expected to record an wider surplus with the current account deficit is lower. For the entire third quarter of 2016, the current account deficit is estimated to be below 2% of GDP, mainly supported by the trade surplus in line with the improvement in the price of primary commodities and a decline in non-oil imports.

Indonesia’s trade balance posted a surplus of US$2.09 billion, an increase compared with the second quarter 2016 surplus amounted to US$1.92 billion. On the other hand, foreign portfolio inflows into Indonesia’s financial markets until September 2016 has reached US$12.1 billion, higher than the inflow of foreign portfolio for the entire 2015.

With these developments, the position of Indonesia’s foreign exchange reserves end of September 2016 stood at US$115.7 billion or the equivalent of 8.9 months of imports or 8.5 months of imports and government foreign debt payments. The figure is above the standard international adequacy approximately 3 months of imports.

Rupiah remained stable with a tendency to strengthen. The rupiah exchange rate in September 2016, on average, has appreciated by 0.41% and reached the level of Rp 13.110 per US dollar. The strengthening continued and by the third week in October 2016 closed at Rp 13,005 per US dollar.

On the domestic front, the strengthening of the rupiah is supported by the positive sentiment in the domestic economy, in line with the conditions of macroeconomic stability is maintained and the implementation of the Law on Tax Forgiveness is going well.

From the external side, the rupiah appreciation associated with the easing of global risk, in line with the easing sentiment associated timing FFR rise in September 2016. Looking ahead, Bank Indonesia will maintain the stability of the exchange rate in accordance with its fundamental value.

Inflation remained under control at a low level and at the end of the year is expected to be at the lower limit of the inflation target range in 2016, which is 4 ± 1%. Consumer Price Index (CPI) in September 2016 recorded inflation of 0.22% (mtm). Inflation is quite restrained and in accordance with the historical trend.

With these developments, CPI inflation in year-to-date (ytd) and annual (yoy) respectively reached 1.97% (ytd) and 3.07% (yoy). Core inflation remained stable, which stood at 3.21% (yoy), in line with weak domestic demand, the trend of declining prices of goods input from global industry, and relatively stable exchange rate. On the other hand, volatile foods (VF) recorded a deflation of 0.09% (mtm) mainly from the correction of the price of some food commodities.

The financial system remained stable with the resilience of the banking system is maintained. In August 2016, the capital adequacy ratio (Capital Adequacy Ratio / CAR) stood at 23.0% and liquidity ratio (AL / DPK) stood at 21.1%. Meanwhile, the NPL (Non Performing Loan / NPL) stood at 3.2% (gross) or 1.5% (net).

Transmission easing of monetary policy through interest rates persist, reflected the continued decline in deposit rates and lending rates. However, transmission through the credit channel is not optimal, seen credit growth is still limited in line with weak demand, including demand from corporate investments are not yet strong.

Credit growth in August 2016 stood at 6.8% (yoy), lower than the previous month’s growth of 7.7% (yoy). Meanwhile, economic financing through the capital market, such as the issuance of shares, bonds and medium term notes (MTN), has increased.

Furthermore, the growth of third party funds (DPK) in August 2016 stood at 5.6% (yoy), down compared to growth in the previous month. Bank Indonesia believes easing monetary policy and macroprudential policy easing has been done can boost credit growth to sustain higher economic growth ahead. (*)


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BI cuts BI 7-day RR Rate by 25 bps to 4.75%

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JBIC commited to give loan for various infrastructure projects in Indonesia


JAKARTA (TheInsiderStories) – The Japan Bank for International Cooperation or JBIC and consortium give a direct lending Yen37.2 billion (appr. US$370 million) for state-own power producer PT Perusahaan Listrik Negara to develop gas-based power plant (PLTGU) Jawa 2 in Central Java. The bank portion Yen22.3 billion at the project with capacity 810 megawatt (MW).

The loans have tenure 14.5 years with lower coupon rate. Previously, JBIC has financed the extension of 3×315 MW’s PLTGU Lontar in Banten province with worth Yen37.9 billion.

“This is the second loan with the same scheme without government guarantees to PLN,” CEO JBIC Tadashi Maeda said at the press conference after Government of Indonesia – JBIC Financial Policy Dialogue Framewrok Annual Meeting 2016 in Jakarta.

The Japanese public financial institution and export credit agency also considers to financed other infrastructure projects such as PLTGU Jawa 1, transportation projects, LNG Receiving Terminal own by energy company PT Pertamina and the bullet train project from Jakarta-Surabaya.

According to Maeda, Marubeni Corp., Sojitz Corp. and Pertamina are preffered bidder for PLTGU Jawa 1 and the investment value larger than PLTGU Jawa 2. While in the LNG Receiving Terminal at Bojonegoro, East Java involved Mitsui Corp., Tokyo Gas and Pertamina.

“In addition we also consider financing in the transport sector such as railways and highways without a guarantee from the government (PPP). We will continue to do coordination and negotiation as PT IIF, PT SMI, Bappenas, KPPIP and other parties,” He said.

In a meeting with Vice President Jusuf Kalla on Oct. 19, Maeda said Japan wishes to take more opportunity to finance Indonesia’s government enterprises like Pertamina and PLN “without government guarantee.

During his visit in Indonesia, Maeda meet with Vice President Jusuf Kalla, Coordinating Minister for Economic Affairs Darmin Nasution, Minister of National Development Planning/Bappenas Bambang Brodjonegoro and Finance Minister Sri Mulyani for further talks on which projects the JBIC will finance.

In 2016, JBIC commit to lend US$3.7 billion for infrastructure projects in Indonesia. Previously in 2015 JBIC has give loan $900 million in 2015 and $1.0 billion in 2014.

The lender also invest in Samurai bond issued by Indonesian government. In five times issuance, JBIC has bought Indonesian Samurai bond $8 billion.

Head of Fiscal Policy Suahasil Nazara adding, Indonesia is consider to enter Japan bond market again in 2017 to maintain the market confidence. He denied to give more explanation on the plan.

JBIC, He continued, Government of Japan’s now allowed the country’s bank to give loan on social infrastructure projects. Indonesia we will explores more how to grab this opportunity, Suahasil said.

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JBIC commited to give loan for various infrastructure projects in Indonesia

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The Insider Stories Market Briefs

JAKARTA (TheInsiderStories) – Followings are some market news that will serve as your investment compiled by our team and Mandiri Sekuritas :

*The auction of Jakarta-Cikampek Elevated Toll Road has been won by a consortium of PT Jasa Marga Tbk (JSMR, Rp4,590, NEUTRAL, TP Rp 5,300). Toll Road Regulatory Agency or BPJT has asked PT Jasa Marga to set up the management of traffic because there will be three major projects for which construction is on toll roads of Jakarta-Cikampek, namely the construction of the light rail rapid (LRT), high-speed trains, and the Jakarta-Cikampek Elevated Toll Road.

*PT Ciputra Development Tbk (CTRA, Rp1,600, BUY, TP Rp1,600) is currently working on two joint venture projects in Batam and the CitraLand Megah Citra Aerolink. The Batam project could be a source for income for CTRA as residential property prices in Batam has jumped 11.3% a year.

*PT Bank UOB Indonesia Tbk (BBIA) released bonds and subordinated bonds worth Rp1.1 trillion with a coupon range of 6.75% – 10% for funding sources needs. The Series A bonds will carry coupon rate of 6.75% -7.4% per year, with tenor of 370 days, Series B bonds with coupon rate of 7.5% -8.25% per year with tenor of 3 years; and Series C bonds with coupon rate of 7.75% -8.5% per year and tenor of five years to maturity.

In addition, the coupon subordinated bonds with a principal value of Rp 100 billion will carry interest of 9.25% -10% per year. The bonds’ interest payment will be made every three months. This bond ratings has been given rating AAidn by PT Fitch Ratings Indonesia.

*JP Morgan is opening a virtual business branch in Indonesia, using technology to expand its geographic reach without having to buy real estate. The virtual branch promises a comprehensive suite of banking services that can be securely accessed from desktops and mobile devices, enabling clients to submit documents digitally, initiate and approve transactions online as well as have complete visibility of all cross-border and statutory payment transactions. JP Morgan was introduced in India last year and  it plans to expand the idea to Thailand and China soon.

*The Indonesian government will ease more license procedures in a bid to boost the activity to look for new oil reserves. The move came amid slow exploration of new oil reserve, dwindling output and rising energy demand in the country. Coordinating Minister for Maritime Affairs Luhut Binsar Pandjaitan, said that the government has trimmed the number of permits required for exploration from 104 to 42. The government plans to drop all taxes charged during exploration period, and raise by more than double production sharing for investors, he said.

*Mazda Motor Corporation has announced that it is leaving Indonesia, but the automaker is not pulling out of the market completely. The Japanese company will continue to have a presence in the market through Eurokars Motor Indonesia, which has been appointed as the Mazda distributor in the republic. Eurokars said that Mazda’s distribution network of 45 dealers in the country will be officially transferred from Mazda Motor Indonesia to Eurokars Indonesia in February. Eurokars has been a Mazda dealer in Indonesia since 2007. (*)



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Source: The Insiderstories
The Insider Stories Market Briefs

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