Securities and Fund Services

10 September 2013

Indonesia Foreign Exchange Update Due to the unbalanced current account deficit and rising inflation levels, Indonesia has experienced USD tight liquidity issue in the market over the past three months. The USD against IDR is trading at a much higher rate than the rates published on market data screens and the unavailability of a reliable source of FX pricing has raised some concerns. In this brief session, Citi Indonesia provides our clients with some color around foreign exchange transactions in this current environment.

This discussion is provided for informational purposes only. For further information, please contact your respective Client Executive or send your email to [email protected]

Introduction Keynote Speakers:

Moderator:

I fl ti rate Inflation t and d Central C t l Bank B k rate t 10.00% 9.00% 8.00% 7.00% 6.00% 5.00% 4.00% 3.00%

BI Rate

Inflation Rate

IDR vs USD1 Exchange Rate 10900 10700 10500

Koko C. Widjatmiko Head of Trading Citi Indonesia

Suhadi Mustopo Head of Corporate Sales & Structuring Citi Indonesia

Daniel Wijono Head of Citi Securities and Fund Services for Indonesia

10300 10100 9900 9700

Purpose of the call  Provide clarification on foreign exchange transactions in Indonesia, particularly on the availability of market reference for quoting Dollar to Rupiah exchange rates  Provide better understanding of the current situation in the market  Understand the expectations from foreign investors  Insight on how to obtain the FX market rate

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Highlights  Since May 2012 2012, spot interbank liquidity has dropped from IDR 1 1.5 5 billion to 100 100-200 200 million  Root cause: Unbalance Current Account Deficit (CAD) – Import requires significant amount of USD – Export E cannot provide id enough h supply l off USD  Limited amount of Central Bank interventions  Central Bank’s Bank s reserves: USD 124 billion to USD 93 billion  Multinational companies started to payout dividends  The Federal Reserves announces the Tapering Plan  Market players becomes cautious to update market screens

Koko C. Widjatmiko Head of Trading Citi Indonesia

 In quoting price, banks consider positions, source of funding and capability to cover shortage  Central Bank has raised 125 bps interest rates, believed to restore market confidence and reduced pressure to IDR  Second quarter deficit of USD 2.3 billion from expected USD 0.3 billion  Inconsistency between market price and prices in Bloomberg and Reuters  Central Banks has made necessary steps to control the situation

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Highlights  Net Open Position (NOP): Maximum threshold for banks to perform FX  NOP is set at 20 percent of capital  Banks with less NOP needs to square q off their p position much earlier  Central Bank imposes huge penalties to breach of NOP level  Citibank Indonesia one of the banks with largest capital, and therefore, one of the largest NOP  Citibank Indonesia accepts third party FX, with priority given to direct clients  Execution of FX may be postponed to a later part of the day, pending availability of the US dollar  Sell S ll side id and db buy side id consistently i t tl showing h i rates t diff differ ffrom Bl Bloomberg b and dR Reuters t

Suhadi Mustopo Head of Corporate S l & St Sales Structuring t i Citi Indonesia

 Contact details: CIJA (Reuters)  Capital level can be obtain from BI website as follow: http://www.bi.go.id/web/id/Publikasi/Laporan+Keuangan+Publikasi+Bank/Bank/Bank+Umum+Konvensional/  Further information: Please contact your respective Client Executive or send email to [email protected]

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