Recession Projection Pressures SUN Auction. The Minister of Finance projects Indonesia’s GDP for the 3Q20 period to grow negatively or contract by -1% to -2.9%. Meanwhile for 2020, the projection is at -0.6% to -1.7%. This projection is valid and convincing, that Indonesia will enter the brink of recession. Something that has been experienced for the first time since 1999. In this SUN auction, the government recorded total bids of IDR 46.12 trillion. The FR0087 series recorded the highest bid, which was valued at IDR 12.79 trillion, with a bid to cover ratio of 2.15x. The government finally won this series worth IDR 5.95 trillion. Meanwhile, the smallest bid occurred in the SPN03201223 series valued at IDR 2.27 trillion with a bid to cover ratio of 2.27x and won with IDR 1 trillion. A number of investors also responded negatively that the number of SUN offered would continue to be abundant, and the issue of changing the independence of Bank Indonesia (BI).
Pefindo Assigns Modernland Default Rating. Indonesian Securities Rating Agency (Pefindo) assigns a selective default rating to Modernland Realty Tbk (MDLN). This rating is valid for the period 17 September 2020 to 1 April 2021, and does not apply to debt securities issued by the company, because it does not take into account the structure and various provisions of the debt securities, the level of protection, and the position of claims of debt securities holders. In addition to the selective default rating, Pefindo assigns a CCC rating to Modernland Realty’s 2015 Phase I Phase I Series B Sustainable bonds. The rating for the bonds worth IDR 150 billion is based on the company’s financial statements as of March 31, 2020 and December 31, 2019. Debt securities rated CCC are currently vulnerable to default and depend on the issuer’s business and financial conditions. Meanwhile, Modernland Realty, through the General Meeting of Bond Shareholders (RUPO) on July 14, 2020, has obtained approval to restructure bonds. The company will extend the maturity of the Sustainable I Modernland Realty Phase I 2015 Series B bonds from 7 July 2020 to 7 July 2021. (Investor Daily)
Ministry of Finance Review of New Car Tax Exemption. Finance Minister Sri Mulyani reviewed the proposal from the Minister of Industry, Agus Gumiwang, regarding the plan to exempt a new car tax or zero percent Motor Vehicle Tax (PKB). As for the fiscal incentives that can be used by industry players, one of which is the automotive income tax (PPh) Article 22 imports. Previously, the Ministry of Finance received various inputs and suggestions from various parties including proposals from Ministries and sector supervisory agencies in the midst of the Covid-19 pandemic. The outline of the proposal is a temporary exemption from related taxes during a pandemic to protect the motor vehicle industry from potential losses. (Investor Daily)
Investors are watching the latest GDP projections. Planned amendments to the Bank Indonesia (BI) law, and the projection of Indonesia’s recession by the Minister of Finance, are still a negative sentiment on the bond market today. Yesterday, the rupiah weakened 0.41% to a level of IDR 14,750 / USD. Previously, Sri Mulyani had projected that the 3Q20 economy would contract by -1.1% to + 0.2%. However, the latest projection per September 2020 is contracted -2.9% to -1.0%. The territorial negatives in 3Q20 will take place in 4Q20. Sri Mulyani’s statement shows that Indonesia will legally experience a recession in 3Q20, after economic growth contracted by 5.32% in the previous quarter. Meanwhile, external negative sentiment came from Europe, which said that the UK might return to implementing a lockdown policy due to an increase in cases of the coronavirus disease (Covid-19). Not only Britain, but many European countries have experienced the same thing, so it is feared that European economic recovery will stagnate again.