Econ and Bond Outlook

PT Bahana Securities
PT Bahana Securities Research Bahana Beacon
2016 Indonesia economy outlook

“Recovery time ”
Research Division
Bahana Securities
2017 SWOT Analysis PT Bahana Securities
Strengths Weaknesses
•Still room for monetary and macro prudential policy •Slower than expected government fiscal reform.
easing. •Continued low tax to GDP ratio.
•Structurally lower inflation supported by imported •Possible higher government interventions on some
deflation. sectors.
•Ongoing structural reform is positive for longer-term •Slow export market recovery and lack of production
economic growth. technology.
•Strong demographic structure. •Continued high non-performing loans and tight liquidity
•Underleveraged economy. in the banking system.
Opportunities Threats
•Continued accommodative monetary policy from global •Global deflations in China, Eurozone and Japan.
economy. •China economy’s hard landing and a stalling US
•Commodity price bounce-back. economy.
•Cheap raw materials imports from China. •Brexit.
•US’ market rising demand. •Another round of Greece debt crisis.
•Weaker USD. •Plunge in oil price.
2
Global Economies
3
Macro risk #1: Brexit PT Bahana Securities
• In June 23, we will have announcement of UK’s decision on Possible impact of Brexit on UK GDP in 2030
Brexit. If the exit occurs, the worst case scenario indicates
UK GDP growth in 2030 would be 220bps lower. 1.55% Brexit best case
• Recent analysis from The Economist suggests that Britain is 0.60%

likely to suffer if they choose to leave as 51.4% of British
exports are to EU countries, while only 6.6% of EU’s exports Realistic range of
are to Britain. growth
• Fortunately, a recent poll from ORB shows that most British -0.80%
people still prefer to stay in the EU. If Britain were to leave

the EU, market turmoil could occur.
-2.20% Brexit worst case
Source: Open Europe
Britain to Eurozone trade exposure Britain to Eurozone trade exposure

(%)
56 55
54
52
52 51 51
50 49
48
46 45
44
42
40
March 15 April 5 April 19 April 26 May 16 May 24
Source: The Economist

Source: ORB Poll 4
Risk #2: China hard landing PT Bahana Securities
• China economy is still facing the risk of moderation as China Debt to GDP Ratio
consensus only expect 6.5% GDP growth in 2016. The other (%)
246.8
risk that looms are the continued high China total debt,
260
231.5
equal to 246.8% of GDP. 240
212.5
219.9 19.1
220 18.4
203.2 22.1
198.9 18.3
• Facing the recent capital outflow and potential currency 200
193.4 20.2
15.6
16.2
24.7
depreciation, our Daiwa’s China economist expect three
20.3 40.5
165.7 15.5
180 163.8 27.4 36.4
164.0
scenarios for the current China condition, which are: (1)
159.9 16.6 15.6 33.8
159.8
160 31.1
16.8
Domestic debt deflation, (2) Currency crisis, (3) Somewhere 140
16.4 22.9 26.7 25.9 28.4 28.0 28.8
between 1 or 2.
15.1 24.0
14.6 13.4 17.5 15.5
120 160.6 165.1
19.4 152.3
17.8 18.1 19.1 145.7
18.2
133.9 134.3
125.2
• USDCNY depreciation towards the 7.00 level should apply
100
109.0 104.7 105.9 103.3 101.7
some pressure on Asian currencies.

80
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Corporate Debt Household Debt Government Debt Bank Debt

Source: Bloomberg Intellignce
Daiwa’s expectation on China’s worst case scenarios

Level of FX
Scenario intervention How could it happen?
1. Domestic debt deflation Maximum - Money keep flowing out on the back of the Fed's policy normalisation and other factors, including China's domestic macro concerns.
- The government uses forex reserves aggresively to stabilize CNY or at least prevent it from sliding too much too fast
- A sell-down in forex reserves leads to a monetary-base contraction (China's own version of QE exit)
- A severe credit crunch ensues, leading to widespread bankruptcies and wealth destrictions. Companies and individuatls are under the pressure to
liquidate their assets, in order to pay for the debts. Aggregate demand suffers, leading to a deflationay spiral.
2. Currency crisis Minimum - The government chooses to save credit at all costs.
- The only way to do this is to print more money, which would no longer be backed by dollar inflows. Excessive money printing and rate cuts would
put the CNY under severe downward pressure.
- The loss of yield advantage leads to significant money outflows and a downward spiral for the CNY
- A sharp currency slide would lead to many defaults on USD debt. Regional banking centres like Hong Kong and Singapore would be under
significant stress, as they have been the key intermediary to bring global cheap dollars into China.
3. Somewhere between (1) & (2) Moderate - The government tries to manage an "orderly downward adjustment for the CNY by maintaining a certain level of interventon overtime.
- Monetary policy could not be as aggressive as under scenario (2). There would be further easing via interest-rate and reserve-ratio cuts but the
pact cannot be too rapid.
- Any fiscal stimulus would mostly be lip services, as the central bank's hands are tied.
- The government keeps tightening capital controls.
Source: Daiwa capital market 5

Risk #3: Global deflation threat; Low inflation, Low growth PT Bahana Securities
• With the absence of a fuel-price shock in 2016, coupled with Indonesian inflation,1Q12-4Q16F
weaker demand, 2016 inflation should be at 3.9%, close to (%)
historically low levels. 9.5
8.5
• On the producer-price side, most of Indonesia’s Asian 8.4
counterparts and trading partners have already experienced 7.5
PPI deflation. It should result in lower pressure from 6.5

imported inflation ahead, and could be a negative factor if 5.5
Indonesia’s producers could not compete with cheaper 3.9
imported products, which will result in higher unemployment 4.5
4.0
4.3
and lower income prospects. 3.5

3.4
3.0
2.5
• To prevent further steep fall in PPI, Indonesia has policy
Apr-16
Apr-12
Apr-13
Apr-14
Apr-15
Oct-16
Oct-12
Oct-13
Oct-14
Oct-15
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jul-16
Jul-12
Jul-13
Jul-14
Jul-15
measures at its disposal, including monetary easing and
fiscal stimulus.
Source: Bloomberg, Bahana estimates
PPI comparisons, March 2016 Indonesia producer price index, 1Q11-4Q15

(%)
(%, y-y)
12
14
12 10
10
8
8
6
6
4 3.49
2 4
0 2.79
2
-2
1.16
-4
0
May-11
May-12
May-13
May-14
May-15
Jan-16
Mar-11
Jan-12
Mar-12
Jan-13
Mar-13
Jan-14
Mar-14
Jan-15
Mar-15
Nov-15
Mar-16
Jul-11
Jul-12
Jul-14
-6
Sep-11
Nov-11
Sep-12
Nov-12
Jul-13
Sep-13
Nov-13
Sep-14
Nov-14
Jul-15
Sep-15
China South Korea Thailand US India Indonesia
General PPI Agriculture PPI Manufacturing PPI
(month)
Source: Bloomberg, as of 31 May 2016 Source: Bloomberg

6
Bear dollar: Likely to persist in 2016-17 PT Bahana Securities
• For FX market, at this point, together with possible US The Dollar movement post Fed rate hike
economic recovery, we foresee lower Dollar Index as likely
to continue into 2017 as US inflation is back and should be
followed by a global recovery.
• ECB and BoJ have also reported continued monetary easing

in 2017. Some recovery in other major economies should
also support weak Dollar.
• Hence, we expect IDR to be slightly stronger in 2017 ending

at 13,500.
Source: Bloomberg
Dollar Index and US inflation, January 2010 – April 2016 Consensus forecast on FX and rates
(%)
(pts) Spot 2Q16F 3Q16F 4Q16F 1Q17F 2Q17
100 -0.5 EUR/USD 1.14 1.12 1.11 1.10 1.10 1.12
0.0
USD/JPY 112.57 110.00 112.00 115.00 115.00 113.00
95
0.5
The Fed rate (%) 0.50 0.50 0.70 0.85 1.00 1.20
1.0
90
1.5 10yr US t-bills yield (%) 1.77 1.86 1.99 2.14 2.28 2.42
85 2.0
3 month LIBOR (%) 0.59 0.59 0.62 0.69 0.82 0.95
2.5
80
3.0 ECB main refinancing rate (%) 0.16 0.15 0.14 0.15 0.17 0.19
75
3.5 10yr German govt bond yield (%) 0.15 0.23 0.30 0.44 0.54 0.70
4.0
3 month Euribor (%) -0.01 -0.02 -0.03 -0.01 0.03 0.06
70 4.5
BoJ Interest rate (%) 0.00 0.00 -0.01 -0.10 -0.10 -0.20
Jul-10
Oct-10
Jul-11
Oct-11
Jul-12
Oct-12
Jul-13
Oct-13
Jul-14
Oct-14
Apr-15
Jul-15
Oct-15
Apr-10
Apr-11
Apr-12
Apr-13
Apr-14
Apr-16
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
10yr Japan govt bond yield (%) -0.03 -0.09 -0.11 -0.08 -0.05 0.02
Dollar Index (LHS) US inflation (reversed, RHS)
3 month Japan LIBOR (%) 0.00 -0.01 -0.04 -0.06 -0.06 -0.07
Source: Bloomberg, as of 2 June 2016 Source: Bloomberg, as of 2 June 2016

7
Bottoming commodity prices PT Bahana Securities
• After 4 years of continued weakness in commodities, we see Energy price movements, July 2015 - May 2016
some price rebounds in energy and metals in early 2016,
(pts) (pts)
supported by delays in the fed rate hike and global monetary 95 65
easing phenomenon. 60
85
55
• Going into 2017 and beyond, we see the possibility of some 75 50
rebounds in prices of commodities, supported by continued

45
65
40
accommodative global monetary policies and China’s
55 35
economic stabilization. 30
45
25
• Bloomberg consensus is expecting higher commodity prices 35 20

Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16
going forward.
Coal (indexed LHS) CPO (indexed LHS)
Gas (indexed LHS) Brent Oil (indexed RHS)
Source: Bloomberg
Metal price movements, July 2015 - May 2016 Commodity prices, consensus
(pts) Last
price 2Q16F 3Q16F 4Q16F 1Q17F 2017F 2018F
90
85 Brent Oil 49.10 46.70 49.96 50.86 51.48 52.15 56.06
80 Natural Gas 1.98 2.10 2.35 2.50 2.90 2.93 2.96

75
70 coal price 48.65 43.40 42.50 42.70 43.30 41.00 -
65 Gold 1,229 1,230 1,200 1,200 1,186 1,200 1,201

60
Copper 4,601 4,799 4,900 5,000 5,025 5,050 5,547
55
Iron Ore 51.36 55.00 50.00 45.00 49.00 45.00 45.00
50
Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16
Nickel 8,400 8,363 8,403 8,440 8,476 8,519 8,723
Copper (indexed) Nickel (indexed) Tins (indexed) Steel (indexed)
Tin 15,675 16,575 16,638 16,850 17,000 17,500 17,538
Source: Bloomberg Source: Bloomberg 8

Domestic economies
9
Indonesia: Growth support from investment and govt expenditure PT Bahana Securities
• Ahead of market and our expectations, 4Q15 GDP Growth contributors, 2014-2015
growth increased to 5.04%, supported by steep jump in
government expenditure and investment especially in (%)
infrastructure. Steep IDR appreciation in 4Q15 and 70

61
59
declining inflation are the main positive growth factors. 60
• Contribution wise, Private consumption continues to be 50

37
the main contributor for economic growth (61%), while 40
31
Government expenditure’s and investment’s shares 30
increase significantly to 10% and 37% respectively. 20
External wise, weak global trade and low commodity 10 8
price is the cause of negative share for net export. 10 2
0
• Overall, Indonesia is still one of the fastest economies -10
Private cons. Gov’t expend. Investment Net exports
in Asia after India, China and the Philippines. -8
-20
2014 2015
Indonesia’s GDP growth composition Source: Bloomberg, Bahana estimate
2015F GDP comparison in BRICS-MINT countries

% y-y 4Q14 1Q15 2Q15 3Q15 4Q15 2014 2015
(%)
GDP 5.0 4.7 4.7 4.7 5.0 5.0 4.8 8.0

7.3 7.4
6.9
7.0 6.5
5.8 6.0
Private Consumption 5.1 5.0 5.0 5.0 4.9 5.3 5.0 6.0
5.1 5.0
4.8
5.0 4.4
Investment 4.6 4.6 3.9 4.8 6.9 4.6 5.1 4.0
3.2 3.0 2.9
2.8
3.0 2.5 2.3
2.1 2.3
Govn Expenditure 0.9 2.9 2.6 7.1 7.3 1.2 5.4 2.0
1.9
0.8
1.0
Export -4.6 -0.6 0.0 -0.6 -6.4 1.0 -2.0 0.0
India China Philippine Indonesia Malaysia Thailand South Korea Singapore Hongkong Taiwan
2015 2016F
Import 3.2 -2.2 -7.0 -5.9 -8.1 2.2 -5.8
Source: Statistics Indonesia Source: Statistics Indonesia, Bahana estimates
10
Layoffs: The impact of the slowing economy PT Bahana Securities
• Slowing economy is helping to trigger layoffs at several Latest news from labor market in Indonesia
No Company Sector Status Number of workers
sectors. We see that Indonesian production capacity 1 Panasonic Manufacture Laid off 1,600
utilization has coming down. 2 Toshiba Manufacture Laid off 865
3 Shamoin Manufacture Laid off 1,166
• In addition to the near 10k layoffs thus far, there is a 4 Starlink Manufacture Laid off 452
possibility for additional quarter of a million severance, 5 Philips Indonesia Manufacture Laid off 800
mainly coming from the manufacturing sector. 6 Ford Motor Indonesia Automotive Laid off 39
7 General Motors Indonesia Automotive Laid off 500
• The layoffs already triggered higher unemployment rate 8 United Tractors Coal Laid off 1,500
above 6.18% at the end of 2015. Total 6,922
9 Sandoz Indonesia Pharmaceutical Plan 200
10 Novartis Pharmaceutical Plan 100
11 Maspion Group Manufacture Plan 1,800
12 Chevron Oil & gas Plan 1,200
Total 3,300
GRAND TOTAL 10,222
Source: Kontan, Kompas, Tempo, liputan6.com, sindonews.com, Bahana
Indonesia’s unemployment rate, 1Q10–4Q15 Indonesia’s Production capacity utilization, 2013 - 2015
(%)
(pts)
82.0
8
79.8
7.5 80.0
78.2
77.8
7 78.0 77.0
76.0 75.5 75.4 75.2

6.5
6 74.0 73.2 73.1 73.1

72.5 72.6
5.5 72.0
5 70.0
3/1/2010
6/1/2010
9/1/2010
12/1/2010
3/1/2011
6/1/2011
9/1/2011
3/1/2012
6/1/2012
9/1/2012
3/1/2013
6/1/2013
9/1/2013
3/1/2014
6/1/2014
9/1/2014
3/1/2015
6/1/2015
9/1/2015
12/1/2015
12/1/2011
12/1/2012
12/1/2013
12/1/2014
68.0
1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15
Source: Bloomberg, Bahana Source: Bloomberg, Bahana

11
Economic slowdown: Close to reaching the bottom PT Bahana Securities
• In our view, the slowdown in GDP growth is close to GDP growth during periods of economic slowdown
reaching the bottom, with inflation expected to drop
within the BI’s target and 2015 current account deficit
improving to around 2.0% of GDP. This opens the
window for the BI to cut its benchmark rate.
• However, as this time around, the Indonesian economic
recovery is unlikely to be fast since commodity prices
should still remain quite depressed by the time the US
decides to begin its tightening cycle.
• Nevertheless, going forward, we need to be ready for
possible economic turbulence as the stability of foreign-
capital inflows is correlated to low US interest-rate
levels.
Source: Bloomberg, Bahana estimates
Indonesia business cycle, 1Q03-1Q17F Economic cycle comparison, 2004-2013

GDP BI rate
(%) (%)
7.0 0.8 2-year Current

growth Global change,
change in account
0.6 prior to monetary post 2
6.5
commodity balance
slowdown conditions years
0.4
prices (%) (% of GDP)
6.0 (%) (%)
0.2
5.5 0.0
2004 4.53 32.04 1.34 Tightening -5%
5.2 -0.2
5.0
5.1 2006 5.20 34.52 1.99 Tightening -3%
-0.4
4.7
4.5
-0.6
2009 6.35 29.05 0.92 Loosening -2%
4.0 -0.8
1Q2003 1Q2004 1Q2005 1Q2006 1Q2007 1Q2008 1Q2009 1Q2010 1Q2011 1Q2012 1Q2013 1Q2014 1Q2015 1Q2016 1Q2017
Output gap (RHS) Annualized GDP growth (LHS)

2013 5.50 -29.18 -3.1 Tightening 0%
Source: Statistics Indonesia, Bahana estimates

Source: Bloomberg, Statistics Indonesia, Bank Indonesia 12
Purchasing Manager Index : Changing sentiment on the ground PT Bahana Securities
• Industry wise, Indonesian economy has continued to record GDP growth by industry, 2014-1Q16
Industry 2014 2015 1Q15 4Q15 1Q16
strong growth on financial services, construction and
GDP 5.0 4.8 4.7 5.0 4.9
utilities. Agriculture, Livestock, Forestry & Fisheries 4.2 4.0 4.0 1.6 1.8
Mining and Quarrying 0.6 -5.1 -1.3 -7.9 -0.7
Manufacturing Industries 4.6 4.2 4.0 4.4 4.6
• In 2015, pressure from IDR depreciation and weak global Electricity, Gas and Water Supplies 5.6 1.2 1.7 1.8 7.5
demand are pushing PMIs to weakening trend especially on Water Supply, Waste Treatment & Recycle 3.1 7.2 5.4 6.8 4.8
continued lower new orders, lower backlogs of works, and Construction 7.0 6.6 6.0 8.2 7.9
Major Trade & Retail 4.8 2.5 4.1 2.8 4.0
pressure on input price.
Transportation and Communications 8.0 6.7 5.8 7.7 7.7
Supplies of accommodation, F & B 6.0 4.4 3.4 5.8 5.6
• Sentiment is changing in 2016 as inflation eased and IDR Information and Communication 10.0 10.1 10.1 9.7 8.3
Insurance and Financial Service 4.9 8.5 8.6 12.5 9.1
stability improved. The sentiment on new orders, moderating Real Estate 5.0 4.8 5.3 4.3 4.9
price level and slight recovery in employment should support Company Services 9.8 7.7 7.4 8.1 8.1
better PMI ahead. Govt Adm, Defense, Social Security 2.5 4.7 4.7 6.7 4.9
Education Services 6.3 7.4 5.0 5.3 5.3
Health and Social Services 8.0 7.1 7.1 7.4 8.5
Other Services 9.0 8.1 8.0 8.2 7.9
Source: Statistics Indonesia, Bahana
Source: Kontan
Sentiment affecting Indonesia’s PMI, July 2015 – April 2016
Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16
Overall condition
Output
New Orders
New Export Orders - - - - -
Backlogs of Work - - -
Output Prices -
Input Prices
Suppliers’ Delivery Times - - - - -
Stocks of Finished Goods
Quantity of Purchases - - - - -
Stocks of Purchases - -
Employment
Scale : Steep drop
Mild drop
No change
Mild increase
Steep increase
Source: Markit, Bahana 13
IDR: Full support from capital inflows and low inflation prospect PT Bahana Securities
Capital flows, 10yr US T-bills yield and IDR movements, Jan ‘13-Mar ‘16
• IDR already appreciated to around the 13,200 level
after suffering a steep depreciation to 14,700 levels (pts) (IDRbn)
in September 2015, supported by capital inflows in

8,000 15,000
7,000 14,000
the bond market and continued low US t-bills yield. 6,000 13,000
5,000 2.79 13,185 12,000
• Our break even analysis indicates foreign investor 4,000
11,000
BEP level in government bond at IDR14,904/1USD.

3,000
10,000
2,000
Hence, we believe sentiment for bonds capital 1,000
9,000
outflows is lower this time. 0

8,000
-1,000 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 7,000

1.82 1.77 6,000
-2,000
• Interestingly, the IDR movements are closely -3,000 5,000
related with Indonesia to US inflation and bonds Equity flow (LHS) Bonds flow (LHS)
yield relations. IDR/1USD (RHS) 10yr US t-bills yield (Indexed, RHS)
Source: Bloomberg, Bahana
Government bond capital inflow analysis IDR movements, covered interest rate parity guidance, Jan’13 – Dec ’16F
Average bond Return of Return of Total BEP
Period Flow of bonds Average IDR (pts)
index bond currency return Currency
16,000
Jan-15 179.4 39,482.0 12,574.4 10.1 -4.7 5.5 13,881.0
Feb-15 186.1 6,839.0 12,760.3 6.2 -3.1 3.0 13,560.2 15,000
Mar-15 184.8 -3,595.0 13,068.5 6.9 -0.7 6.2 13,974.0 14,000

14,000
Apr-15 184.5 4,101.0 12,941.4 7.1 -1.7 5.4 13,870.3
May-15 179.3 6,313.0 13,126.5 10.2 -0.3 9.9 14,469.8
13,000
Jun-15 176.6 23,044.0 13,308.0 11.9 1.1 13.0 14,868.6 13,658
Jul-15 179.2 -3,900.0 13,371.5 10.2 1.6 11.8 14,714.9 12,000
Aug-15 175.5 -7,958.0 13,779.4 12.6 4.5 17.0 15,405.2

Sep-15 172.0 -2,301.0 14,405.8 14.8 8.6 23.5 16,252.9 11,000
Oct-15 177.1 5,390.0 13,783.0 11.5 4.5 16.0 15,274.2

10,000
Nov-15 179.9 19,753.0 13,674.8 9.8 3.8 13.6 14,950.1
Dec-15 181.0 10,003.0 13,836.1 9.2 4.9 14.1 15,011.4 9,000
Jan-16 182.8 19,796.0 13,873.6 8.1 5.1 13.2 14,904.5

Feb-16 188.9 9,460.0 13,511.0 4.6 2.6 7.2 14,108.0 8,000
Mar-16 193.0 21,256.0 13,185.0 2.4 0.2 2.5 13,497.5

Average 181.3 9,845.5 13,413.3 9.0 1.8 10.8 14,582.8
Source: Bloomberg, as of 13 April 2016 Source: Bloomberg, as of 12 April 2016 14
New BI policy measurement PT Bahana Securities
• Recently, BI decided to adjust their monetary policy JIBOR Rate, FASBI Rate, BI rate, Jan 2008 - Mar 2016
toward “best practice”, introducing a benchmark rate (%)
which reflects the short-term money market rates. The 11
Pre quantitative Post quantitative easing
data indicates BI rate is close to overnight rate prior to

easing
10
quantitative easing period, while current overnight rate
9
is quite similar to FASBI rate but far below the BI rate.
8
Hence, BI introduces 7-day repo rate, close to JIBOR
1W to be a new benchmark rate.
7
6.75
6
5.53
• In the process, BI is willing to scrap the huge spread 5
between lending facility and deposit facility from the 4
4.75
current 250bps to 150 bps in August. 3

2
• Since the beginning of the year, BI’s policy rate Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16
loosening has already brought down JIBOR overnight to JIBOR Overnight JIBOR overnight 1W BI Rate FASBI
4.90%.
Source: Bloomberg Bahana
BI’s new monetary operation framework JIBOR curve movement, ytd

(%)
10.0
9.0
9.02 9.11
8.86
8.68 8.55
8.0
7.59 7.86
7.47
7.0
6.67
6.0
6.05
5.53
5.0
4.90
4.0
JIBOR ON JIBOR 1W JIBOR 1M JIBOR 3M JIBOR 6M JIBOR 12M
Current Dec-15
Source: Bank Indonesia Source: Bloomberg

15
Consumption: Supported by the administered price cut PT Bahana Securities
• Electricity State Company (PLN) has cut its electricity Household electricity tariff
tariff on 12 groups in April 2016. From May 2015 until
(IDR/ kWh)
today, PLN has cut 11.3% its household tariff. Those
1,548
action already translated to lower inflation and possible 1,550
consumption recovery in 2016. 1,509
1,500 1,515
• Since the beginning of the year, the government has
cut diesel price by 28% to IDR5,150/liter and 1,450
subsidized fuel price (RON-88) by 13% to
IDR6,450/liter. Given the further decreasing oil prices, 1,400
fuel prices are likely to decreased in 2H16, with
expected RON-88 price to be lower at below IDR6,000 1,350 1,343
at the end of 2016. Hence, we maintain our 3.9%
inflation forecast at the end of 2016. 1,300
• As a consequence, business sentiment is improving on
the ground and PMI uptick to 50.6 point in March.
Source: Bahana, State Electricity Company (PLN)
RON-88 price and Brent oil price Indonesia PMI

(IDR/liter) (pts)
9,200
54
53
8,200
52
7,200 51 50.6
6,200 6,450 50
5,200
49
48
4,200
47
3,200 46 46.9
3130
2,200 45
2/1/2016
4/1/2013
6/1/2013
8/1/2013
2/1/2014
4/1/2014
6/1/2014
8/1/2014
2/1/2015
4/1/2015
6/1/2015
8/1/2015
10/1/2013
12/1/2014
12/1/2013
10/1/2014
10/1/2015
12/1/2015
(month)
RON-88 (RHS) Brent oil price (LHS)
Source: Bahana, Bloomberg Source: Pertamina, Bahana 16

Government’s moves to strengthen domestic demand PT Bahana Securities
• The government has made some measurement to Earnings calculation on different taxable income thresholds
IDR 36mn nontaxable income 54mn nontaxabale income 72mn nontaxable income
support domestic demand by increasing non-taxable Salary compents
income to IDR54mn p.a. from previously IDR36mn p.a. Core salary 5,000,000 5,000,000 5,000,000
This decision should increase annual disposable income Accident insurance premium 15,000 15,000 15,000
by IDR2.7mn (IDR225k/months) or zero tax for

Death insurance premium 9,000 9,000 9,000
Gross salary 5,024,000 5,024,000 5,024,000
someone who earns below IDR4.5mn/month. Deduction
Allowance 136,200 136,200 136,200
• Percentage wise, Statistics Agency (BPS) data indicates

Pensiun contribution 50,000 50,000 50,000
Old age insurance
around 60.6mn household or 89% of total households contribution 60,000 60,000 60,000
Total deduction 246,200 246,200 246,200
are having below 4.8mn per month income.
Monthly net income 5,270,200 5,270,200 5,270,200
Annualized income 63,242,400 63,242,400 63,242,400
• In staples prices, the dynamics indicate lower staple Non-taxable income 36,000,000 54,000,000 72,000,000
inflation this year, except beef price. Taxable income for the year 27,242,400 9,242,400 0
Tax paid 4,086,360 1,386,360 0
Earnings for the year 59,156,040 61,856,040 63,242,400
Monthly addition savings 225,000 340,530
Source: Dirjen Pajak, Bahana
Composition of Indonesian household income Food price change comparison, y-y
No. Monthly salary Number of Household % (%)

16
13.5
14
1 Less than IDR 1.2mn 15,697,542 23.0 12
11.9 11.7
2 IDR1.2mn-1.8mn 16,296,498 24.0 10

8 6.9
5.9
3 IDR1.8mn-3.0mn 18,983,444 28.0 6 5.0 5.0 4.8
4.1
4
4 IDR3.0mn-4.8mn 9,709,836 14.0 2
1.9
0
5 IDR4.8mn-7.0mn 3,733,524 6.0 -2
Chicken Rice Small Chili Egg Mackerel Beef
6 More than IDR7mn 3,194,896 5.0 -4

-4.0
-2.9
-6
Total 100.0 2015 average 1Q16 average
Source: Statistics Agency Source: CEIC

17
Infra progress: Spending improvement detected, risk on tax revenue PT Bahana Securities
• In 2016, the government has allocated an infrastructure Infrastructure budget disbursement by recipient,2015-2016
budget of IDR300tn with breakdown: Ministry of Public of
Works (34%, IDR101.7tn), Transportation Ministry (15%, 2015 2016
IDR45.5tn) and energy and mineral ministry (1%,
IDR4.6tn).
• The budget disbursement is faster this year as overall Other Ministry of

disbursement achieve 5.6% of 2016 target (2015: 3.7%) 44%
Ministry of
Public Work Other
Public Work
34%
for 2M16 while ministry of public works disbursement 36% 50%
recorded 6.3% of 2016 target (2015: 0.7%).

Ministry of
Ministry of Transportation
Ministry of Ministry of
Transportation 15%
• However, the tax collection is not improving as 1Q16 only Energy &
Mineral
18%
Energy &
Mineral
achieved 14.3% of 2016 target (2015: 15.8%). It should Resources
2%
Resources
1%
trigger spending cut and higher fiscal deficit which we expect
to rose to 2.7% of GDP in 2016. Source: Ministry of Public Works, Bahana
Budget disbursement progress, 2M16 Tax collection comparison, 2014-1Q15

(%) (%)
(%)
100
90 100 90 92.0
80 90 80
83.3
Total government spending realization
70 80 Public works spending realization 70
70
60 60
60
50 50
50
40 40
40
30 30
30
20 20 20
5.6 6.3 14.3
10 10 10
0 0 0
2015 2016 2016 2015

2014 2015 2016
Source: Ministry of Public Works, Bahana Source: Ministry of Public Works, Bahana
18
Infra progress: Big housing projects awarded in 2016 PT Bahana Securities
• March data indicated around IDR2.3tn already tendered Awarded project tenders (above IDR100bn), March 2016
in March and focused on Jakarta areas for subsidized
housing development. Project name (IDRbn) Region Project Winner
• Currently, there are still a number of large and multi- Kemayoran subsidized Flat D10-II 686.8 DKI Jakarta PT. Waskita Karya
year projects which are currently still under tender
process such as the Pasar Rumpur rented flat Kemayoran subsidized Flat D10-I 677.1 DKI Jakarta PT. Adhi Karya
(IDR1.55tn), Pasar minggu rented flat (IDR700bn),
Leuwikeris Dam (IDR1tn) in April to May. Kemayoran subsidized Flat C2-III 293.3 DKI Jakarta PT. Brantas Abipraya
• For above IDR100bn projects, public work ministry data Kemayoran subsidized Flat C2-II 408.2 DKI Jakarta PT. Waskita Karya
indicates that most of the tender announcement will
come in June 2016. Kemayoran subsidized Flat C2-I 293.3 DKI Jakarta PT. Brantas Abipraya
Total 2,358.7
Source: Ministry of Public Works, Bahana
Public Works tenders expectation (above IDR100bn) 2016 Upcoming tenders (above IDR100bn), April-May 2016
Project name (IDRbn) Region
(IDRbn) Keramasan Flyover development (MYC) 236.7 South Sumatera
9,000 Simpang Bandara Fly Over, Tanjung Api - Api (MYC) 170.4 South Sumatera
7,970
8,000 Long Apari housing infrastructure. Kab. Mahakam Ulu 105.6 East Kalimantan
Sulawesi rented flat No. 1 110.0 West Sulawesi
7,000 Jawa rented flat No. 1 190.0 East Java
6,000 Leuwikeris dam no. 2, Kab.Ciamis & Kab. Tasikmalaya 623.6 West Java
Leuwikeris dam no. 3, Kab.Ciamis & Kab. Tasikmalaya 380.9 West Java
5,000
4,077 Preservation and Sisingamangaraja road widening, Medan 133.5 North Sumatera
4,000 Brigjen Katamso underpass (MYC) 130.0 North Sumatera
Bantaian Flyover and Gelumbang Flyover (MYC) 236.5 South Sumatera
3,000 2,415 2,329
Air Lematang Indah Bridge (MYC) 499.9 South Sumatera
2,000 Sumatera rented flat no. 2 117.8 West Sumatera
813 High rise rented flat, Pasar Rumput 1,130.0 DKI Jakarta
1,000
High rise rented flat, Pasar Minggu 700.0 DKI Jakarta
0
Water infrastructure development Baku Gunung Mentas 124.5 Bangka Belitung
March April May June July
Total 4,889.4
Source: Ministry of Public works , Bahana Source: Ministry of Public Works, Bahana 19
2016 state budget : Challenging PT Bahana Securities
• In its 2016 state budget, the government has targeted State budget realization, 1Q16
an optimistic 2016 GDP level of 5.3%, down from 2015 2016
Description
2015’s target of 5.7%. Government is planning to do Revised
budget
1Q16
realization
%
State
budget
1Q16
realization
%
some state budget revision with lower inflation, A. Government Revenue & Grant 1,761.70 284 16.1 1,822.50 247.5 13.6
stronger IDR and lower oil prices assumptions. I. Domestic Revenue 1,758.40 283.8 16.1 1,820.50 247.5 13.6
1. Tax revenue 1,489.30 235.8 15.8 1,546.70 204.7 13.2
2. Non tax national revenue 269.1 48 17.8 273.8 42.8 15.6
• In 1Q16, government revenue only achieved II. Grant 3.3 0.2 6.1 2 - -
IDR247.5tn (-12.8% y-y or equal to 13.6% of 2016 B. Government spending 1,984.20 367.7 18.5 2,095.70 390.9 18.7
I. Central government spending 1,319.60 197.3 15 1,325.50 193.5 14.6
target, 2015:16.1%) while government expenditure II. Regional transfer 664.6 170.4 25.6 770.2 197.4 25.6
rose to IDR390.9tn (+6.3% y-y or equal to 18.7% of 1. Regional transfer 643.8 170.4 26.5 723.2 190.3 26.3
2016 target, 2015: 18.5%). State budget deficit is 2. Village fund 20.8 - - 47 7.1 15.1
recorded at –IDR143.3tn or equal to 1.16% of GDP. III. Primary balance -66.8 -41.3 61.8 -88.2 -90.4 102.5
Budget surplus (deficit) -222.5 -83.7 37.6 -273.2 -143.3 52.5
Budget surplus (deficit) of GDP (%) -1.9 -0.7 38.4 -2.2 -1.1 52.6
• Without some significant tax collection improvement, C. Financing 222.5 141.8 63.7 273.2 165.2 60.5
we could have up to IDR500tn of spending shortfall Financing surplus (deficit) 0 58.1 - - 21.9 -
Source: Kontan
with 2.7% fiscal deficit.
2016 draft state budget, macroeconomic assumptions Scenario on state budget (IDRtn), 2015-16
Assumption 2016 state budget 2016 revised state budget* 2016 2016 % of Scenario 1 Scenario 2 (3.0%
Economic growth (%) 5.3 5.3
Inflation (%) 4.7 4 State Bahana's 2M16 % of state Bahana's (2.7% of GDP of GDP fiscal
Exchange rate (IDR/USD) 13,900 13,400 Budget estimate realization budget estimate fiscal deficit) deficit)
SPN 3-month 5.5 5.5
Oil lifting (K bbl/day) 830 n.a. Revenues & Grants 1822.5 1509.6 1195.9 1195.9
Gas lifting (K bbl/day) 1,155.00 n.a. Tax 1360.1 1244.3 122.1 9.0 9.8 930.6 930.6
Oil price (USD/bbl) 50 35
State revenue 1,822.50 1,729.90 Non-tax 462.4 265.3 265.3 265.3
a. Domestic revenue 1,820.50 1,727.90 Expenditures 2095.7 1843.0 251.5 12.0 13.6 1529.3 1566.3
b. Grant 2 2
Expenditure 2,095.70 2,045.20 Central govt 1325.5 1161.1
a. Government expenditure 1,325.50 1,275.00 Infrastructure 313.0 275.0
b. Regional transfer and village
770.2 770.2 Energy subsidies 102.1 89.8
fund
Primary balance -88.2 n.a. Transfer regions 770.2 681.9
Budget deficit -273.2 -315.3 Surplus/deficit (IDRtn) -273.2 -333.4 -333.4 -370.4
Budget deficit (% of GDP) 2.15 2.5
Funding 273.2 315.3
% of GDP -2.2 -2.7 -2.7 -3.0
Source: Ministry of Finance, Bahana estimates 20
Source: Ministry of Finance
Characteristic of common business cycle PT Bahana Securities
21
Indonesia interest rate cycle PT Bahana Securities
(%)
18 0.8
17.1
16
0.6
14
0.4
12.7
12
0.2
10
9.6
8.5 0.0
8
7.7
-0.2
6 6.8
-0.4
4
3.7
2.8
2 -0.6
0 -0.8
3Q05
4Q05
1Q06
2Q06
3Q06
4Q06
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
Indonesia Output Gap (RHS) Inflation (LHS) BI Rate (LHS) 10yr ID govt bond yield (LHS)
Source:Bahana
22
Bonds yield: How low can you go ? PT Bahana Securities
• Govt bond yield spread along the curve continue to Yield spread across the curve
depressed. 10yr-3yr yield currently is at 0.3, drop (%)
1.3% since 2009. Lack of growth prospect is a culprit 2.00
behind declining yield spread. 1.6

1.50
• Indonesia’s potential GDP growth is declining from

5.9% in 2007-2019 to 4.7% in 2015. Lower commodity
price is behind this condition. Lower growth prospect
1.00
should provide lower inflation prospect in near term

and continue to ensure lower government bond yield. 0.50
0.3
• In the next two until three years, we see possibility of

lower inflation and continued low government bond
0.00
2/1/2006
6/1/2006
2/1/2007
6/1/2007
2/1/2008
6/1/2008
2/1/2009
6/1/2009
2/1/2010
6/1/2010
2/1/2011
6/1/2011
2/1/2012
6/1/2012
2/1/2013
6/1/2013
2/1/2014
6/1/2014
2/1/2015
6/1/2015
2/1/2016
10/1/2006
10/1/2007
10/1/2008
10/1/2009
10/1/2010
10/1/2011
10/1/2012
10/1/2013
10/1/2014
10/1/2015
yield depends on the success of infrastructure project
and structural transformation. Excellent execution and -0.50
low inflation could be implied on lower than expected

10yr-5yr yield spread 10yr-3yr yield spread
government bond yield. Source: Bahana
Indonesia potential GDP growth Longer run 10yr yield estimation under some scenario
(%)
(%)
7
9.0
5.9 5.9
6 8.4
8.5
5 8.0
4 4.2 4.7 7.5

7 7.5
7.0
3
6.5
2 2.3
6.0 6.5
1 5.5
5.7
0 5.0
3Q2010
2Q2017
1Q2000
4Q2000
3Q2001
2Q2002
1Q2003
4Q2003
3Q2004
2Q2005
1Q2006
4Q2006
3Q2007
2Q2008
1Q2009
4Q2009
2Q2011
1Q2012
4Q2012
3Q2013
2Q2014
1Q2015
4Q2015
3Q2016
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
3Q18
4Q18
1Q19
2Q19
3Q19
4Q19
Best case Worst case Base case
Source: Bahana
Source: Bahana, Bloomberg
23
Bond market dynamic: Yield edged down, large maturity in mid year PT Bahana Securities
Corporate bonds maturity profile

• As a consequence of improving inflation dynamic (IDRbn)
and economic stabilization, 10-yr Indonesian
government bond yield dropped to 7.6% levels.
12,000
10,663
At the time of growth uncertainty, interest rate 10,000
instrument is more attractive. 7,928
8,000
6,769 6,685
• For corporate bond, the IDR bond rating will 5,841
6,000
have some huge maturity in June and December
4,053 3,919
2016. 4,000
3,680
3,176
3,721
1,675
• Some issuance indications is likely to come at 2,000
783
1,390
the middle of this year. 0
Bahana’s bond issuance pipeline Source: Bloomberg
Bookbuilding
No Company Offering Type Rating Amount Tenor
period
1 PT Maybank Indonesia Finance Bonds PUB I Part II AA+ IDR1.5tn 3 & 5 years Mar-16
2 Indonesia Eximbank Bonds PUB III Part I AAA IDR4.0tn 370 days, 3 & 5 years April - May 2016
3 PT Waskita Karya (Persero) Tbk Bonds PUB II Part I A IDR2.0tn 3 & 5 years May-16
4 PT Wahana Ottomitra Multiartha Tbk Bonds PUB II Part I AA IDR0.8-1tn 370 days & 3 years May-16
5 Bank Maybank Indonesia Tbk, PT (Subordinasi) Subordinate bonds PUB II Part II AA IDR 1.5tn 7 years TBD
6 Bank Maybank Indonesia Tbk, PT (Sukuk) Sukuk Mudharabah PUB I Part II AAA IDR0.7tn 3&5 TBD
7 Japfa Comfeed Indonesia Tbk. Bonds n/a A n/a 3&5 TBD
Source: Bahana
Pattern on government bond yield movements PT Bahana Securities
• Govt bond yield already dropped since the beginning of Seasonal pattern of 10yr ID government bond yield
the year with 10yr yield benchmark dropped to 7.6% Q1 Q2 Q3 Q4
from 8.73% a year earlier. 2005 -12.8 74.9 403.0 -118.4
2006 52.1 52.1 -155.0 -100.8
• Indonesia real yield for 10yr government bond is still 2007 -25.8 -110.8 57.5 37.0
attractive at 336bps, far above 5yr historical average at 2008 110.4 234.0 -51.3 19.4
161 bps. 2009 0.3 -232.0 -52.5 -32.6
2010 -72.5 -82.3 -55.4 -35.1
• Seasonal wise, historical data indicated second quarter 2011 72.8 -86.5 -44.9 -85.0
is the quarter with highest likelihood of yield increasing 2012 -31.3 51.1 -39.0 -71.8
driven by high inflation and money demand during mid- 2013 18.1 118.6 176.1 16.5
year lebaran festivities. 2014 -49.2 3.8 9.6 -21.3
2015 -58.2 105.8 80.3 -56.4
2016 -74.2
Average -5.9 11.7 29.8 -40.8
Median -19.3 51.1 -39.0 -35.1
Increasing yield period 4 7 5 3
Source: Bahana
10yr govt bond real yield difference Real yield movement pattern
Q1 Q2 Q3 Q4
(%)
2005 1.5 2.0 2.1 -8.3
6.0
2006 0.6 0.6 -0.5 6.3
5.0 5.17 2007 0.1 -0.4 -0.2 1.3
2008 -0.6 -1.6 -1.5 1.2
4.0 4.09 2009 0.0 2.1 0.3 -0.3
2010 -1.4 -2.4 -1.3 -1.4
3.0
3.36 2011 1.0 0.2 0.5 0.0
2.58
2.0 2.09 2012 -0.4 0.1 0.1 -0.5
2013 -1.1 0.8 -0.7 0.0
1.0 1.61 2014 0.2 0.6 2.2 -3.8
0.40 2015 1.3 0.2 1.2 2.9
0.0 2016 -1.8
Oct-11
Oct-12
Oct-13
Oct-14
Oct-15
Jun-11
Dec-11
Jun-12
Dec-12
Jun-13
Dec-13
Jun-14
Dec-14
Jun-15
Dec-15
Feb-12
Feb-13
Feb-14
Feb-15
Feb-16
Apr-11
Aug-11
Apr-12
Aug-12
Apr-13
Aug-13
Apr-14
Aug-14
Apr-15
Aug-15
Average -0.1 0.2 0.2 -0.2

-1.0
Median 0.1 0.2 0.1 0.0
10yr bond real interest rate Real yield average Increasing yield period 6 8 6 4
Source: Bahana, Bloomberg Source: Bahana
25
Government bond: Room for lower yield
• At this condition, we see possibility for government bond Credit Matrix spread against government bond
yield to get lower on the back of continued low inflation, 75 Tenor Spread (bps)
bps BI rate cut in 2016 and continued low US T-bills yield.
(Year) AAA AA A BBB
0.1 144.39 176.32 255.51 369.48
• In year to date basis, Indonesian government bond yield
1 154.93 189.35 278.13 404.89
already dropped most in shorter-term tenor with 1 year
2 159.97 191.22 284.41 440.9
bond yield drop most by 123.6bps, indicating market is
expecting further rate cut ahead. 3 163.53 196.30 285.68 481.76
4 167.78 204.52 289.06 522.42
• Even though BI cut the interest rate and inflation edged 5 172.31 212.18 295.82 557.00
lower, we expect the real interest rate is still high at 2016 6 176.30 216.93 305.11 582.82
year end as credit risk problem is haunting financial system, 7 179.28 218.23 315.61 599.90
we expect 10yr ID government bond yield to reach 7.0% at 8 181.08 216.61 326.20 609.71
2016 year end. The main risk for government bond yield 9 181.83 213.01 336.10 614.16
this year is sudden increase in US T-bills yield and emerging 10 181.76 208.33 344.86 615.04
market default.
Source: IBPA
Indonesian yield curve, ytd Yield projection
(pts) (bps)
9.3 200.0
8.8
150.0 1yr 3yr 5yr 10yr 15yr 20yr 30yr
100.0
8.3
50.0 Current 6.870 7.300 7.481 7.664 7.890 7.870 8.220
7.8 0.0
7.3
-50.0 2Q16F 7.220 7.690 8.000 8.200 8.600 8.900 9.200
-100.0
6.8
-150.0 3Q16F 6.950 7.400 7.700 7.900 8.300 8.600 8.900
6.3 -200.0
1yr 2yr 3yr 4yr 5yr 6yr 7yr 8yr 9yr 10yr 11yr 12yr 13yr 15yr 16yr 18yr 20yr 30yr
change (bps) Yield curve (15 Apr 2016) Yield curve (1 Jan 2016)
4Q16F 6.000 6.430 6.750 7.000 7.500 7.800 8.000
Source: Bloomberg, Bahana Source: Bloomberg, Bahana

26
Economic forecasts
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16F 3Q16F 4Q16F 2014A 2015A 2016F 2017F
Real sectors
GDP growth (% y-y) 4.7 4.7 4.7 5.0 4.9 5.2 5.0 5.5 5.0 4.8 5.1 5.2
Private spending (%y-y) 5.0 5.0 5.0 4.9 4.9 5.1 5.0 5.3 5.3 5.0 5.0 5.1
Investment (%y-y) 4.4 3.6 4.6 7.1 5.6 4.7 4.4 5.2 4.1 4.9 5.0 6.6
Government spending (%y-y) 2.2 2.3 6.6 5.1 2.9 6.3 8.3 6.1 2.0 4.3 6.7 6.1
Total exports (%y-y) -0.5 -0.1 -0.7 -6.5 -3.9 3.5 1.4 1.4 1.0 -2.0 2.4 1.0
Total imports (%y-y) -2.2 -6.8 -6.1 -8.0 -4.2 3.6 2.5 1.4 2.2 -5.9 2.4 3.3
FX and interest rate

BI rate (%) 7.5 7.5 7.5 7.5 6.7 6.8 6.5 6.3 7.8 7.5 6.3 6.0
FASBI (%) 5.5 5.5 5.5 5.5 5.0 5.0 4.5 4.3 5.8 5.5 4.8 4.5
Lending facility (%) 8.0 8.0 8.0 8.0 7.8 7.8 7.5 7.3 8.5 8.0 7.3 7.0
10yr ID govt bond yield (%) 7.4 8.3 9.6 8.2 7.7 8.2 7.5 7.0 7.8 8.2 7.8 7.5
JIBOR 1M 6.6 6.7 8.2 7.5 6.1 6.6 6.4 7.0 6.6 7.5 7.0 6.5
IDR/1USD (end of period) 13,075 13,333 14,670 13,788 13,260 13,300 13,700 14,000 12,385 13,788 14,000 13,500
IDR/1USD (Average) 12,958 13,233 13,948 13,850 13,521 13,400 13,600 13,800 11,917 13,494 13,600 13,500
Prices & commodities

Headline inflation (% y-y) 6.4 7.3 6.5 3.4 4.5 3.4 3.9 3.9 8.4 3.4 3.9 5.0
Core inflation (% y-y) 5.0 5.0 5.1 4.0 3.5 3.8 4.0 4.0 4.9 4.8 4.0 4.5
Brent oil price (USD/barrel) 64.9 49.6 52.7 31.0 39.6 33.0 35.0 35.0 99.4 52.5 35.0 60.0
Regular gasoline price, RON 88
(IDR/Liter) 7,400 7,400 7,400 7,400 6,450 6,450 6,300 6,300 8,500 7,400 6,300 6,300
External balance
CA balance (% of GDP) -2.0 -2.0 -1.9 -2.4 -2.1 -2.5 -2.3 -2.1 -3.1 -2.1 -2.3 -2.3
Trade balance (USDmn) 2,320.0 2,082.0 2,741.0 444.0 508.3 2,123.6 2,329.9 1,755.0 -1,942.4 7,587.5 8,574.9 5,573.7
Fiscal deficit (% of GDP) - - - - - - - - -2.2 -2.7 -2.7 -2.5
Others
GDP per capita (USD) - - - - - - - - 3,523 3,212 3,222 3,470
Population (Mn) - - - - - - - - 252 256 259 262
Sumber: IMF, CEIC, Bahana

27
BAHANA
Graha Niaga 18-19th Floor
Jl.Jend. Sudirman Kav 58
Jakarta 12190
Indonesia
Tel. (62-21) 250-5080
Fax. (62-21) 522-6049
DISCLAIMER
The information contained in this report has been taken from sources which we deem reliable. However. none of P.T. Bahana Securities and/or its affiliated companies
and/or their respective employees and/or agents makes any representation or warranty (express or implied) or accepts any responsibility or liability as to. or in relation to.
the accuracy or completeness of the information and opinions contained in this report or as to any information contained in this report or any other such information or
opinions remaining unchanged after the issue thereof.
We expressly disclaim any responsibility or liability (express or implied) of P.T. Bahana Securities. its affiliated companies and their respective employees and agents
whatsoever and howsoever arising (including. without limitation for any claims. proceedings. action . suits. losses. expenses. damages or costs) which may be brought
against or suffered by any person as a results of acting in reliance upon the whole or any part of the contents of this report and neither P.T. Bahana Securities. its affiliated
companies or their respective employees or agents accepts liability for any errors. omissions or mis-statements. negligent or otherwise. in the report and any liability in
respect of the report or any inaccuracy therein or omission there from which might otherwise arise is hereby expresses disclaimed.
The information contained in this report is not be taken as any recommendation made by P.T. Bahana Securities or any other person to enter into any agreement with
regard to any investment mentioned in this document. This report is prepared for general circulation. It does not have regards to the specific person who may receive this
report. In considering any investments you should make your own independent assessment and seek your own professional financial and legal advice
Bahana Beacon Research PT Bahana Securities

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PT Bahana Securities Research Bahana Beacon

2016 Indonesia economy outlook

• Recent analysis from The Economist suggests that Britain is 0.60%

people still prefer to stay in the EU. If Britain were to leave

Source: Open Europe

Britain to Eurozone trade exposure Britain to Eurozone trade exposure

Source: The Economist

some pressure on Asian currencies.

Corporate Debt Household Debt Government Debt Bank Debt

Daiwa’s expectation on China’s worst case scenarios

Source: Daiwa capital market 5

counterparts and trading partners have already experienced 7.5

PPI deflation. It should result in lower pressure from 6.5

and lower income prospects. 3.5

PPI comparisons, March 2016 Indonesia producer price index, 1Q11-4Q15

Source: Bloomberg, as of 31 May 2016 Source: Bloomberg

• ECB and BoJ have also reported continued monetary easing

• Hence, we expect IDR to be slightly stronger in 2017 ending

Source: Bloomberg, as of 2 June 2016 Source: Bloomberg, as of 2 June 2016

• Going into 2017 and beyond, we see the possibility of some 75 50

rebounds in prices of commodities, supported by continued

• Bloomberg consensus is expecting higher commodity prices 35 20

80 Natural Gas 1.98 2.10 2.35 2.50 2.90 2.93 2.96

65 Gold 1,229 1,230 1,200 1,200 1,186 1,200 1,201

Source: Bloomberg Source: Bloomberg 8

infrastructure. Steep IDR appreciation in 4Q15 and 70

• Contribution wise, Private consumption continues to be 50

2015F GDP comparison in BRICS-MINT countries

GDP 5.0 4.7 4.7 4.7 5.0 5.0 4.8 8.0

76.0 75.5 75.4 75.2

6 74.0 73.2 73.1 73.1

Source: Bloomberg, Bahana Source: Bloomberg, Bahana

Source: Bloomberg, Bahana estimates

Indonesia business cycle, 1Q03-1Q17F Economic cycle comparison, 2004-2013

7.0 0.8 2-year Current

Output gap (RHS) Annualized GDP growth (LHS)

Source: Statistics Indonesia, Bahana estimates

in September 2015, supported by capital inflows in

BEP level in government bond at IDR14,904/1USD.

outflows is lower this time. 0

-1,000 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 7,000

yield relations. IDR/1USD (RHS) 10yr US t-bills yield (Indexed, RHS)

Source: Bloomberg, Bahana

Mar-15 184.8 -3,595.0 13,068.5 6.9 -0.7 6.2 13,974.0 14,000

Aug-15 175.5 -7,958.0 13,779.4 12.6 4.5 17.0 15,405.2

Oct-15 177.1 5,390.0 13,783.0 11.5 4.5 16.0 15,274.2

Jan-16 182.8 19,796.0 13,873.6 8.1 5.1 13.2 14,904.5

Mar-16 193.0 21,256.0 13,185.0 2.4 0.2 2.5 13,497.5

data indicates BI rate is close to overnight rate prior to

current 250bps to 150 bps in August. 3

BI’s new monetary operation framework JIBOR curve movement, ytd

Source: Bank Indonesia Source: Bloomberg

RON-88 price and Brent oil price Indonesia PMI

Source: Bahana, Bloomberg Source: Pertamina, Bahana 16

by IDR2.7mn (IDR225k/months) or zero tax for

• Percentage wise, Statistics Agency (BPS) data indicates

Composition of Indonesian household income Food price change comparison, y-y

No. Monthly salary Number of Household % (%)

2 IDR1.2mn-1.8mn 16,296,498 24.0 10

6 More than IDR7mn 3,194,896 5.0 -4

Total 100.0 2015 average 1Q16 average

Source: Statistics Agency Source: CEIC