Prices of most Government Securities (SUN) closed lower, after Bank Indonesia (BI) cut the BI 7-DRRR benchmark interest rate in February 2021. Yields for SUN FR0086 and FR0087 respectively respectively rose to the level of 5.55% and 6.54%. BI announces the results of the Board of Governors’ Meeting (RDG) for the period of February 2021, decides to lower the BI 7 Reverse Repo Rate (BI 7-DRRR) by 25 bps to 3.5%, the Deposit Facility interest rate by 2.75%, and Lending Facility interest rate of 4.25%. For the record, BI lowered its benchmark interest rate by 125 bps in 2020. Yesterday’s decline was the first for 2021. On the other hand, BI has also revised its projection for national economic growth in 2021 to 4.3% – 5.3% from the previous one at 4.8%. % – 5.8%.
PPRE Assesses Bond Issuance. PP Presisi Tbk. (PPRE) is still reviewing the issuance of bonds and medium term notes (MTN) in the era of low interest rates this year. Low interest rates will affect the cost of funds issued when issuing debt securities. On the other hand, PPRE assessed that these banking facilities are still sufficient to fund the company’s capital expenditures for both investment and working capital. Looking at the company’s cash flow, PPRE is projected to have cash flows of IDR 200 billion as of 2020. PPRE is targeting revenues of IDR 3.39 trillion in 2021 or up 113.2% from IDR 1.6 trillion in the first nine months of 2020. Furthermore, gross profit targeted at IDR 518.5 billion or an increase of 73.3% from IDR 299.1 billion at the end of September 2020. Meanwhile, PPRE’s net profit which can be contributed to the owners of the parent entity is targeted to be IDR 65.1 billion or up 300% from IDR 16. 3 billion at the end of September 2020. (Investor Daily)
BI Cuts BI 7-DRRR to 3.5%. Bank Indonesia (BI) has decided to lower the benchmark interest rate aka BI 7 Days Reverse Repo Rate (BI 7-DRRR) at the BI Board of Governors Meeting February 2021. BI 7 day reverse repo rate was lowered by 25 bps to 3.5%. This decision is consistent with the forecast for inflation to remain low and the stability of the rupiah exchange rate which is maintained and further steps to promote momentum for national economic recovery. That way, this benchmark interest rate is at its lowest level in history, after in November 2020 it also set a record low at the level of 3.75%. Apart from lowering the benchmark interest rate, the central bank also lowered the deposit facility rate by 25 bps to 2.75% and the lending facility rate by 25 bps to 4.25%. (Cash)
Negative Sentiment on Domestic Economic Growth Revision. Market players are again watching the negative sentiment from BI’s revision of Indonesia’s economic growth. Yesterday, BI estimated Indonesia’s economic growth in the range of 4.3% – 5.3%. The decline in projections is due to the low realization of economic growth in 4Q20. So that overall in 2020 there was an economic contraction of 2.07%. Going forward, the Indonesian economy is highly dependent on global economic recovery and the national vaccination program targeted by the government to be completed by the end of 2021. In the short term, investors can look at FR0086, FR0087, and FR0083.