Indonesian Stocks Drop Most Since April on Jokowi Reform Hurdles
Indonesia?s benchmark stock index dropped the most in almost six months and the rupiah weakened on concern a new house speaker will hinder President-elect Joko Widodo?s plans to boost growth.
The Jakarta Composite Index closed down 2.7 percent to 5,000.81, the biggest decline since April 10. The rupiah fell 0.2 percent to 12,150 per dollar, taking its drop this week to 1 percent, according to prices from local banks.
Setya Novanto, a lawmaker from the Golkar party, which backed losing candidate Prabowo Subianto in the presidential election in July, was chosen as speaker of the house in a plenary meeting early on Thursday. Parties opposed to Joko, known as Jokowi, that currently control more than half of the seats in parliament may make it more difficult for him to push through policy proposals that have contributed to a 17 percent gain in the benchmark stock index this year.
?Investors had high expectations that there would be a smooth cruise to prosperity for Indonesia,? said Sebastian Tobing, the head of research at Trimegah Securities in Jakarta. ?It is possible that Jokowi?s government can still be efficient regardless of what the parliament is doing. But for now I think the market is becoming more jittery.?
Prabowo?s coalition of seven parties has confounded expectations by holding together after his election defeat, supported by outgoing President Susilo Bambang Yudhoyono?s Democrat party. With a majority in parliament, his lawmakers have passed rules that scrap direct regional elections and limit the ability of the anti-graft body to pursue legislators.
The speaker and his deputies can influence the progress of bills through parliament before they become law. Jokowi takes office on Oct. 20.
Bank Central Asia, the country?s largest lender by market capitalization, fell 4.8 percent. Astra International dropped 5.7 percent and Bank Rakyat Indonesia declined 3.7 percent. The Jakarta equity gauge has lost 4.7 percent since closing at record high on Sept. 8.
The benchmark index may drop to 4,800 in October as the parliament passes ?regressive, market-unfriendly? regulations, John Rachmat, the head of equities research at Mandiri Sekuritas, said Sept. 30.
Foreign investors sold a net $616 million of Indonesian stocks last month, the biggest outflow since June 2013, exchange data show. The Jakarta index was valued at 14.3 times 12-month estimated earnings, or 35 percent more than the MSCI Emerging Markets Index, the biggest premium since May.
Government bonds were little changed, with the yield on the 8.375 percent notes due March 2024 at 8.47 percent, according to the Inter Dealer Market Association.
Thailand Halts Buying Crops as Junta Seeks Sales
Thailand?s junta is changing tack on agricultural policy, saying it will eschew buying farm products directly from growers as state purchases spur overproduction, distort the market and create stockpiles that are hard to sell.
The government will instead look at measures to support earnings, based on incomes plus the payment of a sum to ensure farmers are able to make a living, Minister of Agriculture and Cooperatives Petipong Puengbun Na Ayudhya said in an interview. There?ll also be incentives for growers to switch crops to curb oversupply, notably rice to sugar, said Petipong. The country is the second-largest rice exporter and the biggest rubber shipper.
The military seized power in Southeast Asia?s second-largest economy four months ago, toppling the administration of Yingluck Shinawatra, which spent about 900 billion baht ($28 billion) buying rice and rubber at above-market rates. The rice-buying program, which was described by the Food & Agriculture Organization as unsustainable, spurred the buildup of record reserves. Petipong said that one of his long-term tasks is to restructure farm output, focusing on quality over quantity.
?We don?t want to use taxpayers? money to disrupt the free, commercial system,? said Petipong, a 67-year-old former bureaucrat. ?It?s easy to buy stockpiles but difficult to sell them at the right time and the right place. In the long run, this isn?t going to work.?
Benchmark Thai rice prices dropped in May to the lowest level since at least 2008 amid ample supplies, then rebounded 13 percent as the military administration restricted movement of reserves. Rubber in Tokyo and Thailand extended losses today to the lowest level in more than five years.
?Removing distortion from the market is a good step,? Santitarn Sathirathai, an economist at Credit Suisse Group, said by phone from Singapore today. ?It will allow rice prices, which have been suppressed from oversupply, to improve, while high costs of rice production will be alleviated.?
Junta leader Prayuth Chan-Ocha, who?s taken the post of prime minister, has said he was forced to take over to avoid clashes between supporters of Yingluck and opponents, who?d accused her of corruption and buying the support of rural voters. Yingluck won a parliamentary majority in 2011 after pledging to buy rice directly from farmers to lift incomes.
Thailand will spend 40 billion baht to boost rice farmers? incomes with a one-time payment of 1,000 baht per rai (1,600 square meters) of land to compensate them for low prices this year, Deputy Prime Minister Pridiyathorn Devakula said at a briefing yesterday. The program is capped at 15 rai per farmer.
While agriculture accounts for about 8 percent of gross domestic product, rural residents make up almost 87 percent of Thailand?s 67 million population. Prayuth has pledged to quicken state spending, promote investment and create jobs to spur growth. The economy expanded 0.9 percent in the second quarter, rebounding from a contraction in the first three months.
Rice production surged to a record under Yingluck?s administration as farmers were paid to produce the crop, which they sold to the state at guaranteed rates. Ending stockpiles more than doubled to 12.8 million tons between 2011 and last year, according to US Department of Agriculture data.
The program was ?simply unsustainable and hurting the finances of the country,? Concepcion Calpe, a senior economist at the FAO, said in February. The junta is auditing rice holdings to check quantity and quality, while seeking overseas sales amid concern that some of the reserves may have spoiled.
?In the past three to four years, we have lots of bad rice because of the policy of buying every grain,? said Petipong. Thailand needs to produce quality products instead of quantity products, and to lower production costs, he said.
The changes may help Thailand to regain its position as the largest rice exporter, according to Credit Suisse?s Santitarn. India surpassed Thailand as the biggest shipper in 2012 and maintained that ranking last year.
The government has put on hold the planned sale of 200,000 tons of rubber from state stockpiles to ensure the raw material is sold at a reasonable price, said Petipong. Rubber farmers had threatened to protest this month against falling prices.
?If there is any help for small farmers, it will have to go directly to them,? said Petipong. ?We need to help the poorest of the poor. We have to think very carefully about how to do this without distorting the whole system.?
China to Impose Quota on Local Government Debt Amid Risks
China announced plans to cap the amount of debt local governments can take on and ban them from additional borrowing through financing vehicles as authorities step up efforts to control risks to the financial system.
All borrowing by provinces and cities will need to be within a quota set by the State Council, China?s cabinet, and approved by the National People?s Congress, according to a statement posted to the central government?s website today. No figures were given for the possible amounts of the quotas. The central government won?t bail out local authorities, it said.
China?s borrowing spree since the global financial crisis has prompted economists including those at JPMorgan Chase to compare it to debt surges that tipped Asian nations into crisis in the late 1990s and preceded Japan?s lost decade. The government is trying to rein in financial risks without worsening an economic slowdown.
The effect on growth may be ?short-term negative, long-term positive,? said Tommy Xie, a Singapore-based economist at Oversea-Chinese Banking Corp. ?Short term, local governments will be more cautious, which may trigger deleveraging ? long term, the transparency should boost the efficiency of resource allocation.?
China?s stock market is closed through Oct. 7 for a weeklong holiday after the Shanghai Composite Index gained 12 percent this year. The offshore yuan strengthened 0.2 percent, the most since June, to 6.1658 per dollar as of 2:35 p.m. local time in Hong Kong.
Debt levels will be included as a ?hard criteria? to evaluate officials, the statement said. Local governments will be granted ?limited discretion? over borrowing, including issuing bonds for public-service projects. They should ensure financing for existing projects, it said.
Local-government debt swelled 67 percent from the end of 2010 to 17.9 trillion yuan ($2.9 trillion) as of June 30 last year, according to the National Audit Office. Almost 40 percent of local governments? liabilities came from off-budget funding through their more than 7,000 financing vehicles, the auditor said in December.
Today?s statement comes after China?s legislature passed amendments to the nation?s budget law at the end of August that lay the legal framework for allowing local governments to raise funds by directly selling bonds.
Provinces and cities had previously side stepped rules banning them from directly issuing debt or taking bank loans by setting up thousands of companies to raise money for roads, bridges and sports stadiums.
China will only allow local governments to borrow for capital expenditures on non-profit projects and ?moderately? for repaying existing debt, according to today?s statement. They won?t be allowed to raise money for general spending purposes, it said. While local governments can have ?limited discretion? on borrowing, their financing vehicles will be banned from adding additional government-related debt, the statement said.
China?s chief auditor said in June that growth in local government debt has already slowed, a sign that tighter scrutiny of borrowing, a crackdown on shadow banking, and economic weakness have curbed credit.
China?s economy will probably expand 7.3 percent this year, according to a Bloomberg survey of economists from Sept. 18 to Sept. 23. That would be the slowest pace since 1990. Authorities have been reluctant to use broader stimulus to prop up growth, instead taking targeted steps such as this week?s easing of mortgage policies to aid the housing market.
When local governments run into trouble repaying debt,they should cut the scale of projects, reduce public spending, and sell assets to raise funds, today?s statement said. They should not interfere with financial institutions? normal business and force them to offer financing support, it said.
Poisoning Cases Related to E-Cigarettes Keep Spiraling Upward
Across the United States, poison control centers continue to report soaring numbers of accidental poisonings related to the nicotine liquid used in electronic cigarettes.
The American Association of Poison Control Centers (AAPCC) reports that, through August 31, there have been 2,724 calls so far this year involving exposures to e-cigarette devices and liquid nicotine. That is up from 1,542 in 2013, 460 in 2012 and 271 in 2011.
These reports have spurred a growing call by public health organizations and members of Congress to require child-resistant packaging of nicotine liquid products.
Graphic Warnings Begin to Appear on Cigarette Packs in Costa Rica
Costa Rica has taken another important step to protect public health from the terrible toll of tobacco use, which is the number one cause of preventable death worldwide.
Starting last week, pictorial warning labels are required on cigarette packs sold in Costa Rica. The new warnings cover 50 percent of both the front and back of cigarette packs and feature gruesome images depicting the consequences of smoking, as well as text warnings. Retailers and suppliers have a two-month grace period to sell their stock of old packs.
Newspaper Editorials Laud CVS for Quitting Tobacco, Urge Other Retailers to F...
On September 3, CVS Health announced that it has ended tobacco sales for good at its 7,700 retail pharmacies. In doing so, CVS sent a powerful message: Responsible retailers — especially those that provide health care through pharmacies and clinics – should not be in the business of selling cigarettes and other tobacco products, the number one cause of preventable death.
Newspaper editorials across the country have applauded CVS and called on other retailers to follow CVS's example.
Rupiah strengthens to 12,099 per dollar at close
The rupiah interbank trade rate in Jakarta appreciated by 26 basis points to Rp 12,099 per US dollar in the final session on Thursday.
Samsung aims to maintain dominant market share with new Curved TV
South Korean electronics giant Samsung is looking to maintain its dominant market share in the flat panel television market with the launch of the 78-inch Curved UHD TV for the Indonesian premium market.
Jambi Police bust firestarters
Officers from the Mandiangin Police arrested six residents caught red-handed clearing land through the slash-and-burn method in Mandiangin district, Sarolangun regency, at 2:30 p.m. on Wednesday.