Investors’ negative response to the increase in fuel subsidies will push September inflation higher. The Government’s plan to increase the price of Pertalite subsidized fuel directly affects the inflation rate, which in turn has the potential to reduce people’s purchasing power. From a global perspective, US manufacturing expansion is slowing. US S&P Global Data Aug. showed private sector activity slowed, with the Manufacturing PMI posting a slowdown in expansion to a level of 51.3 points (Vs. Jul. 52.2 points), facing demand pressures due to inflation and tighter corporate financial conditions.

Corporate Bonds
ADHI: Receives Payment for Two Big Projects. PT Adhi Karya (Persero) Tbk (ADHI) received the payments for two large projects during 1H22 valued at IDR2.8 trillion. The two projects are the Jabodebek Phase I LRT project of IDR1.6 trillion (including VAT) from the government through PT Kereta Api Indonesia (Persero) and the Sigli-Banda Aceh Toll Road project of IDR1.2 trillion (including VAT) from PT Hutama Karya (Persero). (Emiten News)

Domestic Issue
BI: Projects Inflation to Reach 5.24% Due to Pertamax Price Increase. Bank Indonesia (BI) projects inflation to reach 5.24% by the end of 2022 due to the increase in non-subsidized fuel prices. BI Governor Perry Warjiyo said that non-subsidized fuel price increase will also affect transportation fares. In addition, food prices have become increasingly expensive due to the Russo-Ukrainian war. Thus, BI predicts core inflation to reach 4.15% by the end of 2022. (CNN Indonesia)

Hawkish BI as risk mitigation, the government’s subsidized fuel policy has the opportunity to have a significant Second Round Effect. Both the supply limitation and the increase in the price of subsidized fuel for Pertalite and Solar types, gave the Domino Effect an increase in transportation fares, production costs and distribution in a number of sectors, including consumer. This inflation-resilient sector predominantly uses diesel fuel in its distribution process. On the other hand, the BI 7DRRR 25bps increase in August provided certainty to the market.

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