INDONESIA MARKET REPORT By Association of Indonesian Securities Companies Taipei, October 2013 1

• • • •

Economic Performance Capital Market Performance Regulatory Developments Prospect for Indonesia Securities Industry & Challenges

Highlights

2

Economic Performance •

•

•

•

Global credits have got off strong start since early 2012 buoyed by the news of a deal in the US Congress to avoid the fiscal cliff supported by manufacturing data from some Asian countries.

IMF World Economic

Actual

Global investors are keen to increase their exposure to the world’s fastest growing economies, especially in the emerging Asia

Outlook

2012

2013

2014

Asia

6.5

6.9

7.0

Japan

1.9

2.0

1.2

China

7.8

7.8

7.7

India

3.2

5.6

6.3

ASEAN-5

6.1

5.6

5.7

United States

2.2

1.7

2.7

Euro Area

-0.6

-0.6

0.9

Russia

3.4

2.5

3.3

Latin America

3.0

3.0

3.4

Indonesia economy slowed for the 4th consecutive quarter to 5.81% yoy in 2Q-2013 down from 6.02% yoy recorded in the 1Q-2013 as government spending is not enough to offset the slowing private sector consumption and investment. The growth rate is mainly driven by 11.5% expansion in transport and communication sector, 8.07% in financial and real estate, 6.88% in construction, 6.6% in electricity, gas and water and 6.5% in trade, hotel and restaurants and 5.9% in manufacturing.

•

Foreign reserve decreased to $98 billion by June 2013 from $112.8 billion at the end of 2012.

•

The exchange rate of IDR against USD keeps depreciating from IDR8,991 (2010) to IDR8,768 (2011), IDR9,638 (2012) and further down to IDR9,929 by June 2013 and IDR 11,461 by end of September 2013

•

The Central Bank increased BI rate to 7.25% in September 2013 after having raised it by 50bps in August. The central bank attempts to stabilize the currency, control the inflation rate and the current account.

GDP (%) Projected

Source IMF World Economic Outlook, July 2013

3

Economic Performance Indicator Population (million)

2008

2009

2010

2011

2012

Jun-2013

229.0

231.8

237.6

241.1

244.7

6.0

4.5

6.1

6.5

6.2

Export (USD million)

139,606

119,646

158,074

200,788

188,496

90,901

Import (USD million)

116,690

88,714

127,447

166,005

179,878

89,901

Surplus (USD million)

22,916

30,932

30,627

34,783

8,618

1,000

Exchange Rate-end period (IDR/USD)

10,950

9,425

8,991

8,768

9,638

9,929

Foreign Exchange Reserve (USD million)

51,639

66,105

96,207

122,671

112,781

98,095

8.39

7.87

7.14

6.9

6.8

6.6

GDP Growth Rate (% y-o-y)

Unemployment Rate (%)

246.5 5.8

Source: BI, BPS

4

Economic Performance

Source : BI – Indonesia Central Bank

Source : BI – Indonesia Central Bank

 In September 2013, Indonesia's central bank increased their benchmark BI rate by 25 bps to 7.25%, to fight against increasing inflation and weakening IDR against main currencies. Bank Indonesia also raised the overnight deposit facility rate, known as FASBI, to 5.5% in September 2013.  August 2013 inflation was recorded at 8.79% y-o-y. This is the highest level since 2009 due to expected fuel price hike to be taken by the Government in the second semester prior to Idul Fitri holidays.  The rupiah fell to a four year-low of 11.461 to the U.S. dollar by the end of September 2013, even though the central bank was suspected to have sold around $200 million of dollars to calm the market. Gradual but persistent weak data on Indonesia, started with slower economic growth, quickened inflation, widening trade deficit, and lastly wider current account deficit has, sent bonds, stock, and IDR currency fell significantly.

Economic Performance Exchange Rate vs. Foreign Exchange Reserve (Q1 2008 – Q2 2013) Exchange Rate

140,000

14,000

120,000

12,000

100,000

10,000

80,000

8,000

60,000

6,000

40,000

4,000

20,000

2,000

(IDR/US$)

(In US$ million)

Reserves

Jun-13

Mar-13

Dec-12

Sep-12

Jun-12

Mar-12

Dec-11

Sep-11

Jun-11

Mar-11

Dec-10

Sep-10

Jun-10

Mar-10

Dec-09

Sep-09

Jun-09

Mar-09

Dec-08

Sep-08

Jun-08

Mar-08

-

Source :BI– Indonesia Central Bank

Capital inflow to Indonesia has increased Foreign Exchange Reserve. On April 2011 Indonesia Country Rating was upgraded by S&P to BB+ (one level below investment grade), marked with positive outlook, due to it’s “resilient” economy and improving finances. Later, in early of January 2012, Moody’s also increased the rating to Baa3.

6

Capital Market Performance •

Stock Market

The recovery of Indonesia economy reflected by the performance of the Jakarta Composite Index (IDX), Listed Issuers and Market Capitalization.  On 31st December 2012, JCI increased by 12.94% to 4,316, with a record high at 5,124 on 20th May 2013 before it declined to 4,818 on 30th June 2013 and even to 4,316 on 30th September 2013 Performance of Various Global Stock Markets as of 30 Sept 2011 2012 Jun-13 2013 1,716,816 Total Trading Value 1,223,441 1,116,113 Country Index Last Mtm Ch.% Ytd Ch.% YTD Change % Chart (IDR Billion) - 8.77% + 53.82 % 

Daily Average Trading Value

4,953

4,537

8,541

4,193.44 3,269.45 3,821.99

4,375.17 3,654.58 4,316.69

5,021.61 4,418.87

436 3,537,294

457 4,126,995 + 16.67 %

472 4,739,604 + 14.84 %

(IDR Billion)

Composite Index - High Low Close Listed Issuers Market Capitalization (IDR Billion)

4,818.89

4,818.8

 46.1%

Brazil China India Indonesia South Korea Singapore Hong Kong Portugal Italy Netherlands United Kingdom Greece Spain Germany France United States Japan

IBOVespa SHANGHAI SENSEX JCI KOSPI FSSTI HANGSENG PORTUGAL PSI20 FTSEMIB AEX FTSE100 ATHEX COMP IBEX35 DAX CAC DJIA NKY

52,338.19 2,174.66 19,379.77 4,316.18 1,996.96 3,167.87 22,859.86 5,953.51 17,434.86 374.92 6,462.22 1,014.06 9,186.10 8,594.40 4,143.44 15,129.67 14,455.80

4.66% 3.64% 4.08% 2.89% 3.66% 4.59% 5.19% 2.51% 4.51% 3.30% 0.77% 12.68% 10.80% 6.06% 5.33% 2.16% 7.97%

-14.13% -4.16% -0.24% -0.01% 0.00% 0.02% 0.90% 5.28% 7.14% 9.40% 9.57% 11.69% 12.47% 12.90% 13.80% 15.46% 39.06%

Source : WSJ Source : IDX

7

Capital Market Performance 5,500

• Jakarta Composite Index and Capital Market Milestones

1992 – 27 September 2013 20-May-2013 Highest Index 5,214.976

5,000

4,500

6-Aug-1996 Founding of KPEI 554.790

4,000

3,500

3,000

2,500

2,000

28-Mar-2002 Implementation of Remote Trading 481.775

24-Jul-1995 Merging process of SSX into Bursa Paralel Indonesia 509.532

30-Nov-2007 Consolidation of the SSX into JSX to become the IDX 2,688.332

21-Jul-2000 Scriptless Trading 512.617

22-May-1995 JATS 461.389

13-Jul-1992 Privatization of JSX 321.544

23-Dec-1997 Founding of KSEI 397.031

1,500

8-Oct-2008 Suspend Trading 1,451.669

1,000

500

-

1992

9-Sep-2002 T+4 to T+3 Settlement 430.271

23-Jul-1997  46.1% Source : IDX 1993 1994 1995

Financial Crisis 718.189

1996

1997

1998

1999

2000

02-Jan-2013 New Trading Hours 4,254.816

6-Oct-2004 Launching of Stock Option 856.060

2001

2002

2003

2004

2005

28-Oct-2008 Lowest Index in 2008 1,111.390

2006

2007

2008

2-Mar-2009 JATS Next G 1,256.109 2009

2010

2011

2012

2013*

*) 27 September 2013

8

Capital Market Performance 5,500

• Jakarta Composite Index

2002 – 27 September 2013

5,000

4,500

4,316.687 4,000

4,423.719

3,703.512 3,500

3,821.992

3,000

2,745.826 2,534.356

2,500

2,000

1,805.523

1,500

1,162.635 1,000.233

1,000

1,355.408

691.895 424.945

500

-50.64% 8.39%

62.82%

2002

2003

44.56%

16.24%

55.30%

52.08%

2004

2005

2006

2007

86.98%

46.13%

3.20%

12.94%

2010

2011

2012

2.48%

-

2008

2009

*) 27 September 2013

2013*

9

Capital Market Performance Distributions of Tradeable Stocks* August 2013

Based on Investors’ Nationality (2010 - August 2013) 2012

2011

2010

Investors’ Nationality (Equity Only) (Mill. USD) Local Investor

%

(Mill. USD)

%

(Mill.USD)

%

(Mill.USD)

%

99,911

44.22%

107,613

41.21%

92,558

40.14%

78,138

37.20%

Individual

13,436

13.45%

14,480

13.46%

16,647

17.98%

13,827

17.70%

Institution

86,367

86.44%

93,003

86.42%

75,783

81.88%

64,150

82.10%

107

0.11%

130

0.12%

129

0.14%

160

0.20%

126,052

55.78%

153,504

58.79%

138,055

59.86%

131,909

62.80%

Individual

2,428

1.93%

3,221

2.10%

2,614

1.89%

341

0.26%

Institution

84,549

67.07%

106,018

69.07%

100,123

72.52%

97,483

73.90%

Others

39,075

31.00%

44,265

28.84%

35,318

25.58%

34,086

25.84%

Others Foreign Investor

TOTAL

225,963

261,117

230,614

210,047

Institutions includes Insurance, Mutual Fund, Pension Fund, Financial Institution, Corporate, Securities Company, Foundation Source Data

:

*) Scriptless Stocks

Indonesia Central Securities Depository (KSEI)

10

Capital Market Performance Foreign Investor Activities

At Indonesia Stock Exchange: 2008 – 27 September 2013

2,804 2,337 2,043

1,703 1,409

1,714 988

Mar

Feb

(443)

May Apr

(260)

186

333

280

273

350

Aug Jun Jul

Sep Oct Nov Dec

(30) (985)

Jan

484

159 Feb

2012

2011

2010

2009

2008

Jan

241

479

May Jun Mar Apr

(165)

1,163

976

43

276 Nov

Jul Aug Sep Oct

(208) (804)

13

2013

610

591

Dec

188

74 May Jun Jul

Jan Feb Mar Apr

(320)

(36)

Aug

(241) (521)

(772)

(2,028)

Figures in Million USD

11

38 Sept

Capital Market Performance Market Capitalization and Trading Value by Industry

M arket Capitalization

Finance (79)

27 September 2013

Trade, Services & Invest ment (110)

23.4% 11.8% 18.4%

Agricult ure (21)

19.3% 2.4% 2.1%

Infrast ruct ure, Ut ilit ies & Transport at ion (46)

Trading Value

13.5%

6.5%

6.1%

6.8%

15.4%

7.6% 6.9% 6.5%

Mining (38)

16.0%

Propert y And Real Est at e (55) 20.9%

8.6%

Basic Indust ry And Chemicals (61)

7.9%

Miscellaneous Indust ry (45)

Consumer Goods Indust ry (37)

12

Capital Market Performance Bond Market In August 2013 total bond outstanding was circa USD 104.5 billion which was represented by Government bonds of 81% and Corporate bonds of 19%. Corporate Bond Outstanding Year

Listed & Traded (Billion USD)

Government Bond Outstanding

Daily Average Transactions Volume (Million USD)

Frequency (X )

Year

Listed & Traded (Billion USD)

Daily Average Transactions Volume (Million USD)

Frequency (X)

2003

5.30

6.86

12

2003

45.53

162.68

51

2004

6.86

8.05

21

2004

44.67

238.12

112

2005

6.48

10.15

21

2005

41.20

220.92

100

2006

7.40

15.09

11

2006

45.73

132.82

134

2007

9.25

30.96

63

2007

52.03

553.86

227

2008

7.63

22.61

50

2008

54.20

395.24

206

2009

8.50

15.68

40

2009

55.31

310.31

218

2010

12.71

40.10

70

2010

70.64

748.54

381

2011

16.03

55.80

73

2011

78.91

867.01

433

2012

19.70

67.69

103

2012

85.31

843.82

552

2013*

19.59

71.52

90

2013*

84.86

672.94

461

*) August 2013

13

14

Capital Market Performance Bond Ownership Distributions August 2013 (in Million USD) Corporate Bond Ownership

Others 417.11 2.21%

Individual 448.44 2.38%

Foundation 270.93 1.44%

Corporate 1,305.78 6.92%

Insurance 2,670.05 14.14%

Financial Inst 3,989.89 21.14%

Government Bond Ownership

Securities Company 85.86 0.45%

Others 3,667.15 4%

Pension Fund 5,592.98 29.63%

Pension Fund 3,496.89 4%

Individual 3,446.54 4.1%

BI 2,126.51 2.51%

Mutual Fund 4,063.53 5%

Securities Company 100.70 0%

Bank 30,551.08 36% Insurance Company 11,414.32 13%

Mutual Fund 4,095.87 21.70%

Source : Indonesia Central Securities Depository (KSEI)

Foreign 25,998.72 31%

Source : Indonesian Debt Management Office (DJPU)

Capital Market Performance Mutual Fund 

The industry enjoyed favorable development up to 2012 and it showed consolidation by June 2013



Composition of mutual funds NAV by type of investment as of July 2013 which totalled at USD 18.89 billion

Sharia-Protection 0.06 0.33% Sharia-Mixed 0.25 1.31% Sharia-Equity 0.42 2.23% Money Market 1.18 6.26%

Sharia-Fixed Income Sharia-money Index 0.12 Sharia-Index market 0.04 0.14 0.63% 0.20% 0.00 0.73% 0.01%

Mixed 2.29 12.13%

ETF-Fixed Income 0.00 ETF-Equity 0.02% 0.03 0.13% ETF-Index 0.035 0.19%

Equity 7.72 40.86%

Fixed Income 2.94 15.55% Capital Protection Fund 3.67 19.42%

Source : OJK Source : OJK

15

Capital Market Performance New Issues and fund raising The industry enjoyed favorable development up to 2012 and the first semester in 2013 and it showed consolidation trend by the second semester.

IPO (IDR trillion)

3.85

29.68

19.59

10.14

New issue structure by equity related products i.e. rights, warrants; and bonds issued by corporations and governments in 2012 10.11

Rights (IDR trillion)

8.56

48.16

42.14

18.19

18.46

Others (IDR trillion)

2.50

1.87

0.58

1.64

1.94

Sub Total BONDS IPO - Corp (IDR

14.91

79.71

62.31

29.97

30.51

trillion)

29.68

39.07

45.93

69.45

31.14

IPO - Govt (IDR trillion)

94.57

122.53

163.12

197.55

112.15

Sub Total

124.25

161.60

209.05

267.00

143.29

Total

139.16

241.31

271.36

296.97

173.80

NEW ISSUES EQUITY

2009

2010

2011

2012

Jun-13

Source : IDX

16

Capital Market Performance JCI in Comparison to Regional Indices Performance 2011 – 27 September 2013 2011 TSE

Tokyo Stock Exchange (TSE)

DJI

Dow Jones (DJI)

2012

Change 11-12

2013*

Change 12-13*

8,455.350

10,395.180

22.94%

14,760.070

41.99%

12,217.560

13,104.140

7.26%

15,328.300

16.97%

UK (FT100)

5,572.300

5,897.810

5.84%

6,523.370

10.61%

PSE

Philippine Stock Exchange

4,371.960

5,812.730

32.95%

6,379.810

9.76%

BM

Bursa M alaysia (BM )

1,530.730

1,688.950

10.34%

1,776.160

5.16%

IDX

Indonesia Stock Exchange (IDX)

3,821.992

4,316.687

12.94%

4,423.719

2.48%

18,434.390

22,656.920

22.91%

23,207.040

2.43%

FT100

HKeX

Hong Kong Exchanges (HKeX)

SET

Stock Exchange of Thailand (SET)

1,025.320

1,391.930

35.76%

1,417.490

1.84%

SGX

Singapore Exchanges (SGX)

2,646.350

3,167.080

19.68%

3,210.180

1.36%

BSE

Bombay Stock Exchange (BSE)

15,454.920

19,513.450

26.26%

19,726.860

1.09%

KRX

Korea Exchanges (KRX)

1,825.740

1,997.050

9.38%

2,011.800

0.74%

SSE

Shanghai Stock Exchange (SSE)

2,199.420

2,269.128

3.17%

2,160.030

-4.81%

*) 27 September 2013

17

18

Capital Market Performance Market Cap Among Asia-Pacific Region Exchanges 26 September 2013 (Billion USD)

4,570

3,372

3,278

1,374

1,171

1,044 588

TSE

HKEX

SSE

ASX

IDX : Indonesia Stock Exchange KRX : Korea Exchange SET : Stock Exchange of Thailand BM : Bursa Malaysia SGX : Singapore Exchanges TSE : Tokyo Stock Exchange HKEX : Hong Kong Exchanges SSE : Shanghai Stock Exchange BSE : Mumbai Stock Exchange

KRX

BSE

482

SGX

BM

HKEX 19.98%

: Australia Stock Exchange : Philippine Stock Exchange

385

SET

IDX

SSE 19.42%

ASX 8.14% TSE 27.08%

Source : Bloomberg

ASX PSE

394

PSE 1.30%

KRX 6.94%

BSE 6.18%

IDX 2.28%

SGX BM SET 2.86% 3.48% 2.33%

220 PSE

19 19

Capital Market Performance 2012

Malaysia

Source : CEIC & Bloomberg

Thailand

Korea

Philippines

Australia

India

Japan

Indonesia

36%

37%

55%

48%

45%

50%

61%

73%

65%

55%

100%

88%

80%

119%

93% 69%

79%

101%

87%

106%

102% 77%

86%

151%

137%

Singapore

2011

“Capital market penetration in Indonesia Is relatively low in Asia ...” 165%

179%

224%

2010

60%

254%

Market Capitalization to GDP Ratio in Asia

China

Regulatory Developments The newly establishment Financial Services Authority (Otoritas Jasa Keuangan/OJK) started their operation by supervising non-bank companies in 2013 and banking sector in 2014 2012 was a strategic year for the Capital Market Infrastructure Development Team (TPIPM) that was successful in establishing, completing & operating core infra-structure projects (started in 2010)

KSEI coordinated the implementation of Single Investor Identity (SID) and Investor Fund Account (RDN) to enhance protection and improve disclosure through AKses facility KPEI coordinated the establishment of STP (Straight Though Processing ) and Continuous Net Settlement (CNS) to omit manual intervention, enhance security & processing speed. BEI coordinated the establishment of Data Warehouse-Business Intelligent (DW) by integrating CM networks to enhance surveillance, trading and reporting system. Exchange Members (EM) started to operate their new working capital (MKBD) formula to improve risk management and to up-grade its integrated FO-BO system.

20

Regulatory Developments The incorporation of PT P3IEI, a company especially established to manage securities investor protection funds and to enhance investors protection as well as capital market integrity & professionalism.

OJK issued a regulation on a new reporting requirement (ARIA) for fund managers, related to their contractual and non-contractual products to improve disclosure information. The establishment of PT Indonesian Capital Market Electronic Library (ICAMEL) to boost capital market awareness and education to public investors New regulation for issuers on the establishment of Audit Committee to be in line with the recommendation from the Report on Observance of Standards and Codes (ROSCO – CG) To develop sharia IPO market, OJK issued a new regulation that allows issuers to use one consolidated prospectus for conventional and sharia instruments to improve efficiency. KYC and Anti-Money Laundering enhancement regulations

21

Prospect for Indonesia Securities Industry & Challenges  Global economy expected to record lower growth of 3.0% in 2013, the Euro area continued experiencing prolonged debt crisis, meanwhile the US economy was showing some improvements, but remained fragile  Bank Indonesia surprised the market on 12th of Sep 13 by increasing benchmark BI rate by 25 bps to 7.25% after increasing it by 50% to 7.0% (29th of Aug), by 50 bps to 6.50% (11th of Jul), as it stepped up its battle to combat inflation, exchange rates and outflows. The increase was the third since June 2013 whereby BI increased its rate by 25 bps after keeping it at low at 5.75% since February 2012  Positive economic outlooks: • The Indonesia economic growth is expected to reach 5.5%-5.9% (revised from 5.8%-6.2%) in 2013 and to 5.8%-6.2% (from 6.0%-6.4%) in 2014 amid to the less vibrant global economic growth of 3.5%. • Inflation in 2012 is manageable (targeted at 4.5%) and interest rate is stable.  Estimated strong net profit growth while global economic upset by crisis of the Euro Zone  OJK issued their first regulation on consumer protection that focus on client asset protection will continue to strengthen the confidence of the investors.  Implementation of bureaucracy reform at Regulatory function system and supervision (OJK/ Financial Services Authority) that is integrated in overall activity of financial services sector  The OJK is primarily responsible for supervising and regulating financial and banking industries:  Financial services activities in banking sector  Financial services activities in capital market sector  Financial services activities in insurance, pension funds, financing institutions, and other financial services institutions 22

Prospect for Indonesia Securities Industry & Challenges  Growing volume transactions followed by increasing domestic investor participation  Strict market supervisory and broker internal control employed, paired with system enhancement to increase efficiency in the operation area, enforcing more robust operation for brokers  The implementation of online trading and DMA facilities is expected to increase trading value and fasten the growth of investors significantly  The challenges for securities industry are:]  The development of capital market derivatives products  The development of retail market (currently is only 300,000 accounts or 0.125% of total Indonesia population)  To increase number of listed companies  The challenges for OJK are :  Supervision of future and commodities market (which is under Trade Ministry)  Supervision of cooperatives for the ability to take deposit ( which is under Cooperatives and SME’s Ministry)  Fee and charges to industry  Financial literacy

23