Asean’s Stretched Stimulus Stand
The Jakarta exchange veered again toward positive results as the inflation-confident central bank trimmed the benchmark rate 25 basis points while orchestrating simultaneous bond and currency defenses. In September foreigners who have been compelled to hold longer maturities abruptly slashed their one-third local debt share as the rupiah also dropped over 5 percent. International reserves that have doubled since the 2008 crisis to $115 billion were down $10 billion on dual exit and intervention, as the monetary authority took its ownership to 7 percent of government instruments outstanding. It kept 10-year yields constant until a 1 percent spike late in the month as domestic banks and funds too became uncertain over allocation under official support influence. A budget surplus account has as well been used for purchases, but dealers note that bid-offer spreads have widened on lackluster commercial appetite. Securities markets were likewise spooked by overseas repayment problems at the premier Bakrie family conglomerate which could force asset disposals including of valuable coal mines. GDP growth is due to top 6 percent this year, as inflation should stay within the 4.5 percent mid-range target into 2012 on subsidy reduction suspension. In Malaysia, where the foreign-held bond portion is one quarter the total, the ringitt fell 10 percent from its post-peg high as domestic borrowing was hiked 50 percent for the fiscal year to cover the 5 percent of GDP deficit and increased social and infrastructure spending in advance of likely elections in 2012. Prime Minister Najib has already diluted an arbitrary detention law to win favor after street protests erupted and has offered direct cash transfers to low-income families to overcome economic slowdown. S&P criticized the lack of tax overhaul in the latest blueprint, especially introduction of a general goods and services levy to ease reliance on oil company profits. Sovereign wealth fund Khazanah will issue an inaugural yuan-denominated Islamic bond to underwrite power projects, after a previous attempt was scotched amid unsettled markets. Plantation concerns, which have been popular on the Kuala Lumpur bourse with the run-up in palm oil prices, may be further privatized to raise revenue.
In the Philippines, where remittances from the Gulf have receded, President Aquino unveiled a stimulus package basically advancing existing commitments within an overall deficit position as GDP growth sputtered to 3.5 percent. Typhoon cleanup will add to costs and as consecutive storms arrived the administration failed to attract acceptable bond auction participation. Monsoon rains coincided with currency decline there and in Thailand, where a monthly current account gap was registered just after the Shinawatra clan regained office on an expensive rural giveaway plan.
