GR Market Update Aug18 PDF

PANS Market Update 2018 “Storms don’t last forever”
MARKET UPDATE 2018

STORMS DON’T LAST FOREVER
RESEARCH TEAM
August 2018
www.pans.co.id
Summary review in 2018: Struggling to Fire Up
Slower recovery in global market, China rebalancing model will impact our
domestic growth, uncertainty due to potential trade war
Liquidity pressure from developed market especially U.S and Europe, due to
monetary normalization
Potential downside risk amidst tightening environment and financial environment

will impact vulnerable emerging market
Government stimulus package (infrastructure reform, tax-amnesty, fiscal package

and lower logistic cost) will support growth in the long-run
Fiscal challenges, weak tax collection, government cut spending and slow
recovery in purchasing power
Valuation discount and undervalue currency will support our JCI target of 6,516
in 2018
2
Global Outlook
3
Global: Too Slow, Too Fragile
 The recovery remains too slow and too fragile, Weak pace
while global growth expected to grow by 3.9% in 4.0 8.5
2018 and 2019 (2017: 3.4%). 3.0 8.0
 Inflation pick-up in some countries, on the back of 2.0 7.5
recovery in developed market and combination of 1.0 7.0

higher oil-price and commodity prices.
 Monetary policy normalization going forward, given
0.0 6.5
increase in inflation pick-up, this will make, equity -1.0 6.0
less attractive -2.0 5.5
Mar-15
Mar-13
Mar-14
Mar-16
Mar-17
Mar-18
Sep-13
Sep-14
Sep-15
Sep-16
Sep-17
US Euro Asia (RHS) China (RHS)
Source: Bloomberg
Inflation pick-up Monetary policy normalization

10.00 5.00
8.00
4.00
6.00
3.00
4.00
2.00
2.00
0.00 1.00
-2.00 0.00
-4.00
Feb-00
Feb-01
Feb-02
Feb-03
Feb-04
Feb-05
Feb-06
Feb-07
Feb-08
Feb-09
Feb-10
Feb-11
Feb-12
Feb-13
Feb-14
Feb-15
Feb-16
Feb-17
Feb-18
Aug-00
Aug-01
Aug-02
Aug-03
Aug-04
Aug-05
Aug-06
Aug-07
Aug-08
Aug-09
Aug-10
Aug-11
Aug-12
Aug-13
Aug-14
Aug-15
Aug-16
Aug-17
-1.00
Jul-05
Jul-06
Jul-07
Jul-08
Jul-09
Jul-10
Jul-11
Jul-12
Jul-13
Jul-14
Jul-15
Jul-16
Jul-17
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
US Euro China Japan US Euro Inflation target
Source: Bloomberg Source: Bloomberg
4
Global: Slower production
 Global economy expected to record flat move in Global growth driven by Emerging Economies
FY18, backed by slowing growth of advanced
economy but improving in emerging economies.
 Although global production index is still moving in
the expansion zone, it grows in a slower pace,
indicated by decreasing output index and decreasing
export orders.
 Total trade volume and investment is expected to
slow down in the end of FY18, impacted by trade
wars. Most of it contributed by decreasing trade
volume in emerging markets.
Source: Bloomberg
Global production grows slower.. ..trade volume and investment too..
5
U.S: Economic recovery continues
 Better jobless claims and unemployment level, PCE Reaching the inflation target
(%)
inflation almost reached Fed’s target of 2% 12 600
 U.S earnings is recovered, with S&P 500 grew by 10 500
18.2%, supported from energy and information 8 400
technology segment
6 300
 Increasing probability of Fed rate hikes by 4 times

4 200
this year, reached level of 72.5% (1-Sept-17: 0,19%)
2 100
0 0
May-11
May-12
May-13
May-14
May-10
May-15
May-16
May-17
May-18
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Sep-10
Sep-11
Sep-12
Sep-13
Sep-14
Sep-15
Sep-16
Sep-17
Jobless claims (RHS) PCE inflation Unemployment rate (LHS)
Source: Bloomberg
Recovery earnings in U.S Unexpected FFR hikes will trigger outflow in emerging market
SECTOR 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 80.00%
Information Tech -0.2% -0.5% 0.1% 4.1% 8.9% 15.2% 23.4% 23.7% 29.6% 30.4%
70.00%
Energy -66.9% -74.3% -81.9% -72.3% -30.2% 45.5% 213.0% 211.7% 118.8% 102.7%
Financials -3.9% -6.4% 12.7% 13.9% 23.2% 29.5% 5.7% 7.3% 10.9% 13.9% 60.00%
Health Care 7.7% 13.0% 9.4% 12.3% 12.7% 8.6% 10.5% 7.4% 9.5% 11.8% 50.00%
Consumer Staples -3.4% -3.8% -1.2% 2.0% 4.8% 6.9% 7.0% 7.6% 9.2% 8.0%
40.00%
Consumer Disc 13.2% 15.1% 15.4% 12.1% 8.6% 2.0% -0.5% 1.4% 2.6% 6.0%
30.00%
Industrials 8.2% 6.9% 5.0% 7.4% 4.3% 5.2% 5.4% 6.5% 10.4% 16.2%
Utilities 4.7% 4.9% 6.1% 3.7% 5.2% 14.1% -1.0% 4.3% 6.8% -0.4% 20.00%
Telecommunication 3.9% -3.0% -5.1% -9.2% -4.3% 1.1% 1.6% 6.2% 10.7% 18.0% 10.00%
Materials -10.8% -15.3% -9.2% 7.1% 9.0% 15.1% 9.5% 10.9% 15.6% 21.1%
0.00%
S&P 500 -4.1% -3.8% -2.7% 0.1% 5.6% 9.5% 11.0% 12.9% 15.3% 18.2% 01-Sep-17 01-Oct-17 01-Nov-17 01-Dec-17 01-Jan-18 01-Feb-18 01-Mar-18 01-Apr-18 01-May-18 01-Jun-18 01-Jul-18 01-Aug-18
Dow Jones -7.7% -8.4% -4.5% -0.6% 7.8% 11.8% 13.8% 14.1% 16.6% 20.4% 2 rate hikes 3 rate hikes >4 rate hikes
6
US: Double-Edged Sword
 US economic growth is improving, indicated by US economic growth improves

increasing capacity utilization.
 Labor absorption is improving, indicated by constant
increasing of employment to working age population
ratio and decreasing trend of unemployment rate
 Fiscal incentives through tax cut plan will be
another economic stimuli in the near term.
However, there are two anticipating policies, which
can be drag to the economy, which are the
increasing investment cost as higher benchmark rate
and long-term impact of trade war’s retaliation.
Source: Bloomberg
Unemployment rate declining However, fiscal performance is a bit lower
7
Europe: Improvement is Under Way
 Despite Euro’s quantitative easing, worth around Accelerating recovery

EUR60bn per month, recovery is accelerating with 5.00 14.00
inflation and unemployment is improving, with 4.00

12.00
inflation reached 1.9% in May 2018, near the ECB 3.00

10.00
target of 2% 8.00
2.00
 The recovery in Eurozone is underway, as the 6.00
consensus for the Eurozone growth has risen from 1.00

4.00
1.4% to 1.8% in 2017, this also triggered ECB to end 0.00

2.00
the bonds’ buying program in December -1.00 0.00
 Unemployment is trending down in all European
Nov-06
Nov-11
Nov-16
Sep-07
Feb-08
Sep-17
May-09
Sep-12
Feb-13
May-14
Oct-09
Oct-14
Aug-05
Aug-10
Aug-15
Jun-06
Jun-11
Jul-08
Jul-13
Jun-16
Dec-13
Apr-07
Dec-08
Apr-17
Apr-12
Mar-05
Mar-10
Mar-15
Jan-06
Jan-11
Jan-16
countries: Italy, Germany, France and Spain Unemployment (RHS) Inflation
Source: Bloomberg
Recovery in financial sector Unemployment trending down

5,800,000 6.0%
13 30
5.0%
5,600,000 12
4.0% 11 25
5,400,000 10
3.0%
9 20
5,200,000 2.0%
8
1.0%
7 15
5,000,000
0.0% 6
4,800,000 5 10
-1.0%
4
4,600,000 -2.0%
Sep-11
Sep-13
Sep-15
Sep-17
May-10
Sep-10
Sep-12
May-13
Sep-14
May-15
Sep-16
May-17
May-11
May-12
May-14
May-16
May-18
Jan-10
Jan-12
Jan-14
Jan-16
Jan-17
Jan-11
Jan-13
Jan-15
Jan-18
3 5
Dec-91
Aug-92
Apr-93
Dec-93
Aug-94
Apr-95
Dec-95
Aug-96
Apr-97
Dec-97
Aug-98
Apr-99
Dec-99
Aug-00
Apr-01
Dec-01
Aug-02
Apr-03
Dec-03
Aug-04
Apr-05
Dec-05
Aug-06
Apr-07
Dec-07
Dec-11
Aug-08
Apr-09
Dec-09
Aug-10
Apr-11
Aug-12
Apr-13
Apr-15
Dec-13
Aug-14
Dec-15
Aug-16
Apr-17
Dec-17
Total loan Loan growth (RHS) Italy Germany France Spain (RHS)
8
Europe: Nice Kick-Off
 Economic activity in Euro-Area is improving, PMI in expansion zone

indicated by increasing index of manufacturing
production in almost all Euro-Area members
 However, the improvement magnitude is fairly
limited, indicated by flat core inflation trend. This
shows that the economic activities is not completely
recovered yet. This is interesting, given the wage
growth is increasing.
 In the time any reverse happen to the consumption
behavior, given the buying power improving, the
growth will me more sustainable.
Source: Bloomberg
Headline & Core Inflation in Euro Area Inflation expectation & wage growth in Euro Area
9
China: Debt Boom
 China has shifted its economic Slowdown by design

manufacturing/industrial based to consumption 16.0 66.4 70.0
64.6
 Manufacturing sector showed signs of stabilization, 14.0 60.0
as PMI reported at level of 51.2 (expansion zone) in 12.0

51.6 51.8
50.0 51.0
50.0
July 2018 10.0
37.3 40.0
 China debt-to-gdp ratio reach all time high of 8.0

30.0
259.3% in 2016, this debt boom could lead to a new 6.0
20.0
financial crisis 4.0
2.0 10.0
0.0 0.0
2010 2011 2012 2013 2014 2015 2016
Consumption to GDP (RHS) Real GDP Industrial Prod.
Source: Bloomberg
Still in expansion mode Poses a great risk

60
270.0
58 259.3
56
250.0
54 240.5
52 229.3
230.0
50 218.1
48 210.0 205.3
200.6
46 195.1
190.4
44 190.0
42
40 170.0 164.4 164.3

160.5 162.4
38
Dec-07
Dec-12
Dec-17
Jun-05
Jun-10
Jun-15
Apr-06
May-08
May-13
Aug-14
Jan-05
Oct-08
Apr-11
Oct-13
Apr-16
May-18
Nov-05
Mar-09
Aug-09
Jan-10
Mar-14
Jan-15
Sep-06
Feb-07
Nov-10
Nov-15
Sep-16
Jul-07
Sep-11
Feb-12
Jul-12
Feb-17
Jul-17
150.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
10
Domestic Outlook
11
Indonesian Economics Map: Few More Blind Spots in FY18
Consumption will recover in a very slow

phase if there is no “big push policy” from
government.
Slower growth of commodity price may give

some adjustments to the economy.
Global asset market correction & Advanced

economy trade policy would increase capital
outflow pressures and currency pressures
amidst Indonesian expansion move.
Low government revenue to financing

sizeable infrastructure projects.
Political Years: Good and Bad Things
12
Economics: Still Stands in the Solid Ground
 Fundamentally, Indonesian economy is still strong, Consumption still Stands as a Major Drag
given the unemployment rate and pressures on the
price level keep declining. Stable volatile food,
even in a high season, like Lebaran, is a form of
successful price stability management.
 However, Indonesia still has to face the consumption
segment, as a largest contributor in the economy, is
still moving a slower pace. In this case, the
Government, needs to disburse a policies, which
will has an immediate impact. For instance, the
fiscal stimulus.
Source: Bloomberg
Unemployment rate keep declining (%) Manageable Price Level
13
Consumption: Drag on Growth
Real GDP by Expenditure- Consumption (YoY) Slowing growth of Retail Sales
Recovery from Car and Motorcycle Sales Recovery from consumer loan and import growth
14
Investment: Improving Optimism
 Total investment growth increasing, leads to a more Investment Growth Improving

production stimuli to domestic economy. This
condition is showed clearly by the increasing growth
of direct investment. The increasing growth of
direct investments indicate a better expectation on
Indonesia’s long-term prospects.
 Another optimism reflected by increasing growth of
foreign investment.
Source: Bloomberg
Direct Investment also Growing Foreign Investor Place More Money
15
Current Account: Big Job for Indonesia
 Indonesia still has a big homework on minimizing Current account balance (% GDP) –Emerging Markets
the current account deficit, as the capital inflow
which finance the deficit has been decreasing in
growth. Compared to its peers, Indonesia poses the
highest deficits.
 Given the high proportion of commodities in the
trade balance, Indonesia’s current account deficit is
vulnerable to volatility of commodity prices.
Bearing that the commodity price growth will
slowing in 2H18, we see a large room for current
account deficit to GDP from 2,1% to 2,3% in FY18.
Source: Bloomberg
The Growth of Key Commodity Price Indonesia’s current account
16
Key Economic Challenges FY18
17
External Sentiment: Trade Wars
 As a small-open economy, Indonesia is vulnerable to

the external shocks. Therefore, any sentiments
coming from advanced economy like US and China will
give a huge impact to the Indonesia.
 External shock such as trade wars and normalization
policy of the advanced economies will transmitted to
the Indonesian economy through 2 sectors: financial
and trade
 Transmission of externals sentiments through the
financial sector relatively faster than through the
trade channel. However, the downside through trade
channel are more disruptive to Indonesia since it last
longer and have a fundamental impacts.
TIMELINE
Trump announced 10% Trump responded the China announced
tariff on aluminium and EU’s vow with aggressive additional tariff for 128
25% on steel “additional tax” treat US products
1- Mar-18 2-Mar-18 3-Mar-18 8-Mar-18 1- Apr-18 2-Apr-18
Trump signed the tariff China’s tariff regulation

European Union (EU) protocol implemented
vow to retaliate
18
External Sentiment: US Normalization Policy
Normalization Phase in US’s history
Source: Bank Indonesia
 As history recorded, US now experiencing the slowest normalization phase. The slow phase
benefit the whole world, especially for the emerging economies, for the limited surprises which
can limit the possibility of massive asset reverse flow.
 Therefore, we believe, the normalization will not give a huge fundamental economy to Indonesia
as US also has to consider the impact of the contraction’s stance to economic acivities.
19
Financial Sector Stable
Impact of External Shock: Estimated Capital Outflow (% GDP)
Source: Bank Indonesia
 If political and economics instability continue to make the market, IMF predicted that there will
be a capital flow out from the emerging economies as investors will tend to avoid risky assets.
Compared to the peers, IMF predicted a relatively lower outflow from Indonesia. It shows a
higher optimism on the “pull factors” of Indonesian economy.
20
Economics: Financial Sector Stable, But Vulnerable
 With a relatively high portion of foreign ownership Government Bond by Ownership (% of GDP)
in Indonesian capital markets, Indonesia can be a 40
top loser when external’s wave come. 35
 Any good sentiments investors give to advanced 30
economies will trigger an outflow from emerging 25

20
markets. It will trigger a higher volatility of the
15
Rupiah. Compared to its peers, Indonesia recorded a
10
relatively high YTD depreciation.
5
 In the long-term, if the global waves continue to
0
flood the markets, we see an urgency for BI to catch
Apr-05
Apr-07
Apr-09
Apr-11
Apr-13
Apr-15
Apr-17
Dec-03
Aug-04
Dec-05
Aug-06
Dec-07
Aug-08
Dec-09
Aug-10
Dec-11
Aug-12
Dec-13
Aug-14
Dec-15
Aug-16
Dec-17
up with the contraction stance of advanced
economies. Source: Bloomberg
Bond 10 yr Spread US – Indonesia & Exchange Rate(%) The Worst Perfomer, but Enough Buffer for Now
Spread 10yr Indonesia- US (LHS) Rp/USD (RHS) Indian Rupee
16 16000
Indonesia Rupiah
Philippine Peso
12 14000
Chinese Yuan
8 12000 Taiwan Dolar

Singapore Dolar
4 10000 Thai bath
Malaysian Rinngit
0 8000
Hong Kong Dolar
Japanese Yen
-7% -6% -5% -4% -3% -2% -1% 0% 1% 2%
Source: Bloomberg Source: Bloomberg *6 August 2018
21
Downside Transmission From Commodity Price
 The deficit of Indonesian current account need to be downsized as the capital flow trending down. One of the
problems is the fundamental issues on Indonesian competitive advantage. Dominated by commodities,
Indonesian have to pay for more expensive import products. This condition need a big push from the
government to help the industry create a high value added products.
Indonesian Export dominated by Raw Product While Import dominated by More-Expensive Commodities
2016 28.42 30.95 18.3 16 6.32 2016 16.47 19.38 13.28 33.92 16.95
2011 43.97 27.41 11.07 11.53 6.02 2011 16.58 26.65 10.62 31.4 14.75
2006 36.53 27.29 15.89 12.38 7.91 2006 18.55 25.76 9.4 29.86 16.43
2001 31.74 22.09 22.7 12.38 11.09

2001 19.07 19.31 11.72 35.13 14.77
1996 35.12 26.14 22.5 10.02 5.62

1996 14.23 16.67 11.37 42.56 15.16
Raw Product Processed Commodity Low-tech Product

Raw Product Processed Commodity Low-tech Product
Mid-tech Product High-tech Product
Mid-tech Product High-tech Product
Source: Bank Indonesia Source: Bank Indonesia
22
Outlook 2018: Indonesia Will Handle the Global Waves
All in, we believe Indonesia will be able to handle the global waves well.
GLOBAL INDONESIA
2016 2017 2018F
Current acc balance -1,78 -1,71 -1,90
Fiscal balance -2,50 -2,40 -2,50
GDP Growth YoY 4,94 5,07 5,21
Consumption YoY 4,99 5,00 5,20
Inflation 3,02 3,61 3,60
7DRR 4,75 4,25 5,25
IDR/USD 13.423 13.588 14.200
10 govt yield 7,80 6,30 7,26
FX Reseve (USD bn) 116,00 130,20 110,00
23
Equity Market
24
Liquidity: Global Rebalancing
• Recent market correction triggered by the global Strong correlation of currency and market return
rebalancing and currency depreciation 7,000 12,000
• Highest net foreign outflow in the past 10 years, 6,500 12,500
mainly due to improvement in U.S and Europe 6,000 13,000
• JCI in negative divergence phase in May-17 – Apr-17, 5,500 13,500

indicate the asset price increase will not be
sustainable, however recent foreign buying support 5,000 14,000
JCI back to its trend 4,500 14,500
4,000 15,000
Dec-14
Mar-15
Dec-15
Mar-16
Dec-16
Mar-17
Dec-17
Mar-18
Jun-15
Jun-16
Jun-17
Jun-18
Sep-15
Sep-16
Sep-17
JCI Index USDIDR
Source: Bloomberg
Highest outflow in the past 10 years Foreign start buying

(Rp triliun) 60,000 7,000
50.0
40.9
40.0 40,000
6,500
32.9
30.0
25.3
20,000
21.8
18.5 6,000
20.0 17.6 16.6 16.3
13.4
0
10.0
Feb-16
Sep-16
Feb-17
Sep-17
Feb-18
Jan-16
Jul-16
Aug-16
Jan-17
Jul-17
Jan-18
Jul-18
Aug-17
Aug-18
Oct-16
Oct-17
Mar-16
Mar-17
Mar-18
Dec-16
Dec-17
May-16
Nov-16
Jun-16
Apr-17
Jun-17
Nov-17
Apr-18
Apr-16
May-17
May-18
Jun-18
5,500
0.0 -20,000
5,000
-10.0
-40,000
-20.0
-21.4 -20.1 4,500
-60,000
-30.0
-40.0 4,000
-39.9
-80,000
-50.0 -47.7
-100,000 3,500
-60.0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 ytd
Foreign Flow Cumulative JCI (RHS)
25
Liquidity: Global Rebalancing
Equity Fixed Income

TOP BUY TOP BUY
Country QTD YTD Country QTD YTD
China 7,113 18,776 Qatar 27,940 67,254
France 15,843 9,386 China 32,571 65,772
Qatar 232 1,513 France (6,284) 33,694
Vietnam (165) 1,399 South Korea 3,834 32,063
South Africa (905) 590 Japan 13,396 12,782
Bulgaria 9 64 Brazil 335 5,734
Sri Lanka (14) 62 Italy (26,966) 3,378
Ukraine 7 16 Thailand (97) 3,369
Dubai 11 (287) Mexico 2,159 2,581
India 211 (410) Philippines 123 2,548
Turkey (463) (1,248) Ukraine 279 634
Philippines (51) (1,270) Indonesia 1,216 621
Brazil 717 (1,810) Turkey 172 76
Malaysia (347) (2,054) Bulgaria (441) (515)
South Korea 316 (3,390) Poland (2,280) (1,595)
Indonesia 128 (3,441) South Africa 582 (2,234)
Thailand (155) (5,797) Malaysia 866 (2,545)
Taiwan (203) (9,121) India 493 (5,616)
Japan 7,011 (30,734) Czech Republic (10,836) (8,521)
26
Currency: Undervalued
• Rising US interest rates have been a strong factor for Rupiah is undervalued in emerging market countries
dollar appreciation, this also supported by US tax 4
reforms 3
• Emerging market currencies especially Indonesia 2
traded discount to Dollar 1
• At this stage of cycle, we expect Rupiah to

0
appreciate to Rp14,200 in 2019, while in average
economist estimate Rupiah to reach Rp14,192 in 2019 -1
-2
-3
KRW
HKD
CLP
COP
ZAR
BRL
MYR
SGD
RUB
HUF
PEN
CZK
BGN
IDR
MXN
TWD
CNY
INR
PHP
RON
PLN
ARS
THB
TRY
Source: Bloomberg
Currently traded discount to its 5 year REER Most economist estimate Rupiah to appreciate going forward
2.5
4.5
2
1.5 4
1 3.5
0.5 3
0
2.5
-0.5
2
-1
-1.5 1.5
-2 1
-2.5 0.5
May-18
Nov-13
May-14
Nov-14
May-15
Nov-15
Feb-16
May-16
Aug-16
Nov-16
May-17
Nov-17
Aug-13
Feb-14
Aug-14
Feb-15
Aug-15
Feb-17
Aug-17
Feb-18
0
12,000
12,222
12,444
12,666
12,888
13,110
13,332
13,554
13,776
13,998
14,220
14,442
14,664
14,886
15,108
15,330
IDR % Over/Under 20% Overvalued 20% Undervalued zero
27
Earnings Review: Sign of recovery
Trailing 12M sales, quarterly Trailing 12M earnings, quarterly
900 20.0% 80 60.0%
800 70
15.0% 40.0%
700
60
600 10.0% 20.0%

50
500
5.0% 40 0.0%
400
30
300 0.0% -20.0%
20
200
-5.0% -40.0%
100 10
0 -10.0% 0 -60.0%
Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18
Trailing 12M Sales Per Share Trailing 12M Sales Per Share growth (RHS) Trailing 12M Earnings per Share Trailing 12M Earnings per Share growth (RHS)
Trailing 12M sales, yearly Trailing 12M earnings, yearly

3,500 25.0% 300 50.0%
40.0%
3,000 20.0%
250
30.0%
2,500 15.0%
200 20.0%
2,000 10.0% 10.0%

150
1,500 5.0% 0.0%
100 -10.0%
1,000 0.0%
-20.0%
50
500 -5.0%
-30.0%
0 -10.0% 0 -40.0%
2010 2011 2012 2013 2014 2015 2016 2017 2010 2011 2012 2013 2014 2015 2016 2017
Trailing 12M Sales Per Share Trailing 12M Sales Per Share growth (RHS) Trailing 12M Earnings per Share Trailing 12M Earnings per Share growth (RHS)
Source: Bloomberg Source: PANS
28
Financial Review: Solid capital structure
Higher default risk on smaller companies Stronger balance sheet on large companies
1.2 80.0 0.2 60.0
0.1
1.0 70.0
0.0 50.0
0.8 60.0
-0.1
40.0
0.6 50.0 -0.2
-0.3
0.4 40.0 30.0
-0.4
0.2 30.0 -0.5

20.0
-0.6
0.0 20.0
-0.7 10.0
-0.2 10.0
-0.8
-0.4 0.0 -0.9 0.0
Q1-13
Q2-13
Q3-13
Q4-13
Q1-14
Q2-14
Q3-14
Q4-14
Q1-15
Q2-15
Q3-15
Q4-15
Q1-16
Q2-16
Q3-16
Q4-16
Q1-17
Q2-17
Q3-17
Q4-17
Q1-18
Q2-18
Q1-13
Q2-13
Q3-13
Q4-13
Q1-14
Q2-14
Q3-14
Q4-14
Q1-15
Q2-15
Q3-15
Q4-15
Q1-16
Q2-16
Q3-16
Q4-16
Q1-17
Q2-17
Q3-17
Q4-17
Q1-18
Q2-18
Net Debt to EBITDA Total Debt to Total Equity Net Debt to EBITDA Total Debt to Total Equity
Lower foreign debt portion Healthier capital structure on consumer sector

200 14
5.8%
12
5.6% 150
10
5.4%
100
8
5.2%
6
5.0% 50
4
4.8%
0
Jakmine Jakcons Jakbind Jaktrad Jakinfr Jakprop Jakmind 2
4.6%
-50 0
4.4%
2014 2015 2016 2017 Net gearing ICR Altman
29
Earnings Review: Financial Improvement
• On financial results, both operating and earnings Recovery across the sector
Sector 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18
shows improvement
Agricultural -6% -13% -17% -10% -4% 9% 29% 24% 12% 9%
• Strong result in top-line: Agricultural (gradual Finance 9% 16% 17% 11% 18% 14% 9% 10% 2% 3%
production recovery), construction (improving new Construction & Prop 6% -1% 2% 11% 14% 15% 29% 34% 20% 16%
order) and mining (higher coal price) Mining -17% -14% -35% -32% -28% -21% 15% 35% 42% 39%
Consumer Goods -11% 2% -1% 19% 3% -12% -10% -10% 5% 8%
• Maintain our positive view on: Infra (attractive
Basic Industry -10% -7% -7% -2% 6% 6% 12% 15% 13% 19%
valuation), consumer (purchasing power recovery),
Infrastructure 4% 1% -1% -1% 1% 5% 6% 11% 13% 14%
oil (manageable supply on the back of production Manufacture -1% -1% -4% -3% 0% 1% 1% 5% 4% 5%
cut), and coal (positive outlook on coal price) Miscellaneous -5% -5% -6% -4% 2% 5% 4% 10% 11% 13%
Trade 1% -5% -5% 2% 1% 4% 3% 8% 15% 18%
JCI -5% -4% -4% 2% 4% 4% 7% 13% 12% 12%
Source: Bloomberg
Earnings growth is back Overweight on infra, consumer, oil-related and coal

Sector 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 Sector OW N UW
Agricultural -74% -26% - - 302% 20% 11% 10% 9% 30% Poultry √
Infra-related √
Finance -5% 2% 5% -4% 6% 12% 10% 33% 23% 16%
Telco-related √
Construction & Prop -18% -16% -3% 1% -6% 4% 15% 30% 30% 15% Consumer √
Mining - - - - - - - - 69% -34% Banks √
Consumer Goods 12% -2% 2% 4% 1% 13% 17% 18% 11% 9% Oil-related √
Basic Industry -20% 20% 96% 84% 81% 21% -21% -18% -29% -14% Cement √
Infrastructure 291% 376% 146% 64% 7% -13% -23% -16% 18% 27% Plantation √
Automotive √
Manufacture -3% 12% 32% 26% 26% 7% -4% -2% -6% 2%
Property √
Miscellaneous -12% -4% 18% 28% 42% 37% 26% 33% 14% 21% Coal-related √
Trade -50% -67% -63% -12% 12% -7% -9% -14% -28% 18% Metals √
JCI -4% 0% 20% 38% 27% 25% 23% 26% 19% 11% Media √
Source: Bloomberg Source: PANS
30
Earnings Review: Earnings mostly in-line, soft consumption
Revenue Operating profit Net Income

Ticker
1H18 YoY % to 2018F 1H18 YoY % to 2018F 1H18 YoY % to 2018F
Sector: Telco
TLKM 64,368,000 0.5% 47.8% 18,084,000 -24.0% 42.1% 8,698,000 -28.1% 39.6%
EXCL 11,046,042 1.0% 46.5% 616,439 -20.1% 39.1% (81,741) na -17.4%
ISAT 5,692,420 -21.9% 20.9% (76,840) na -4.2% (505,699) na -563.2%
Sector: Toll Road
JSMR 18,660,629 42.5% 174.8% 2,197,933 15.2% 44.9% 1,045,620 2.9% 53.0%
Sector: Construction
ADHI 3,141,877 39.7% 16.5% 307,977 136.2% 16.0% 73,282 282.8% 9.1%
WIKA 12,977,369 36.8% 39.1% 1,084,843 54.2% 33.1% 517,251 18.7% 33.9%
PTPP 9,507,151 17.0% 35.2% 978,658 10.0% 29.2% 479,752 -16.2% 26.6%
WSKT 22,899,801 47.3% 43.6% 5,065,354 129.4% 57.7% 2,990,180 133.3% 66.0%
WTON 2,595,745 30.0% 41.0% 259,902 18.9% 39.8% 160,531 17.2% 37.4%
WSBP 3,846,149 44.1% 42.7% 1,050,097 79.0% 53.2% 690,687 58.2% 53.2%
Sector: Property Residential
SMRA 1,198,533 -2.5% 20.2% 291,215 -2.9% 20.3% 41,839 -41.8% 9.9%
ASRI 1,014,521 44.5% 27.7% 529,843 92.4% 32.4% 299,512 68.0% 27.2%
BSDE 3,120,029 -27.6% 39.1% 1,001,627 -48.7% 27.7% 409,224 -79.6% 14.8%
LPKR 2,467,363 -5.5% 19.2% 159,150 -50.1% 8.5% 132,766 -6.9% 15.9%
CTRA 2,804,848 -0.8% 36.5% 597,186 -2.6% 30.6% 176,202 -48.1% 15.7%
PWON 3,376,939 14.4% 53.2% 1,515,392 5.9% 49.9% 1,129,279 25.4% 51.2%
Sector: Banking
BBCA 35,026,542 5.7% 55.7% 14,242,293 6.5% 44.3% 11,420,955 8.4% 44.2%
BBRI - - - - - - 14,886,046 10.9% 45.8%
BMRI 51,096,357 -0.5% 60.9% 15,658,755 27.3% 49.2% 12,178,075 28.7% 49.9%
BBNI 31,947,077 11.8% 63.4% 9,360,033 15.6% 48.3% 7,436,693 16.0% 48.1%
BBTN 11,166,619 14.3% 88.9% 1,804,254 9.9% 41.0% 1,423,713 12.0% 41.2%
BDMN 12,220,466 0.5% 65.0% 2,840,313 -1.8% 48.4% 2,011,240 -1.4% 47.0%
Sector: Hospital
SILO 2,848,470 3.3% 43.5% - - - (25,056) na -36.9%
MIKA 1,365,928 10.4% 48.6% 400,560 2.3% 52.6% 320,727 -9.1% 48.7%
Sector: Automotive
ASII 112,554,000 14.8% 51.0% 12,465,000 34.2% 53.6% 10,384,000 11.0% 49.2%
Sector: Cement
SMGR 13,308,440 4.7% 45.8% 1,701,252 0.1% 54.2% 971,337 -11.1% 47.2%
INTP 6,484,408 -0.9% 42.2% 253,169 -71.7% 20.5% 355,106 -60.6% 21.6%
SMCB 2,201,582 2.0% 23.2% (104,422) na -54.4% (332,372) na 53.3%
Sector: Plantation
AALI 9,021,481 5.6% 55.7% 1,086,596 -28.5% 44.3% 783,908 -23.3% 48.7%
LSIP 1,763,272 -28.5% 40.0% 224,763 -57.7% 26.9% 224,921 -47.5% 36.2%
SIMP 6,633,745 -22.1% 42.4% 528,161 -43.6% 25.9% 57,105 -81.8% 10.0%
SGRO 1,333,450 -17.3% 37.4% - - - 88,480 -49.2% 32.6%
31
Earnings Review: Earnings in-line, soft consumption
Revenue Operating profit Net Income

Ticker
1H18 YoY % to 2018F 1H18 YoY % to 2018F 1H18 YoY % to 2018F
Sector: Tobacco
HMSP 49,157,548 5.5% 46.3% 7,622,587 0.1% 44.7% 6,112,931 1.0% 46.0%
GGRM 21,980,863 10.1% 23.9% 2,722,659 -1.9% 22.3% 1,892,063 0.1% 22.5%
Sector: Coal Mining & Contracting
PTBA 10,525,078 17.4% 48.3% 3,522,656 42.2% 57.6% 2,576,310 49.4% 53.8%
ITMG 378 2.8% 20.8% 88 -1.6% 21.9% 58 1.7% 20.8%
ADRO 764 5.1% 21.3% 171 -9.7% 16.8% 74 -23.4% 14.7%
UNTR 38,944,238 32.3% 50.1% 7,452,345 59.1% 55.4% 5,479,136 60.1% 54.6%
Sector: Metals & Mining
INCO 375 28.3% 44.9% 45 na 29.2% 29 na 38.1%
ANTM 5,731,416 247.2% 29.7% 478,761 na 32.4% 245,679 3602.8% 38.8%
TINS 2,035,095 -0.6% 21.3% 115,425 -16.3% 13.8% 54,548 -18.0% 12.4%
Sector: Oil and Gas
PGAS 798 6.9% 25.6% 144 -7.8% 35.1% 80 -17.0% 35.6%
MEDC 579 42.4% 48.5% 242 86.7% 52.9% 41 -48.6% 32.5%
AKRA 11,214,321 21.6% 48.0% 501,952 -33.8% 37.3% 1,121,025 90.5% 98.3%
Sector: Consumer
UNVR 21,183,734 -0.4% 48.1% 4,797,361 -2.2% 47.8% 3,529,869 -2.6% 46.2%
INDF 35,999,542 1.0% 48.5% 4,268,808 -3.3% 46.2% 1,956,008 -12.7% 43.9%
ICBP 19,459,307 5.4% 50.4% 3,107,644 11.0% 54.7% 2,291,090 9.5% 54.6%
KLBF 10,380,529 3.1% 47.9% 1,557,251 -1.2% 46.3% 1,215,866 0.0% 48.1%
MYOR 10,816,910 15.2% 46.4% 1,006,680 9.1% 37.6% 735,870 34.3% 42.1%
AISA 4,920,632 -24.8% 92.9% (547,648) na -93.4% (551,903) na -285.5%
ROTI 1,276,208 7.8% 45.3% - - - 39,972 -19.8% 23.0%
Sector: Poultry
JPFA 16,704,468 18.2% 49.6% 2,169,183 124.7% 70.3% 1,108,283 146.2% 57.2%
CPIN 25,612,651 2.7% 47.6% 3,447,079 64.5% 84.2% 2,432,722 59.7% 62.8%
Sector: Retail
LPPF 5,915,413 3.1% 55.5% 1,687,743 0.7% 68.0% 1,344,808 0.5% 66.7%
MPPA 5,877,088 -12.5% 42.7% - na - (262,450) na -347.6%
ACES 3,384,743 22.6% 49.6% 531,716 30.8% 50.6% 426,006 29.8% 46.3%
Sector: Media
SCMA 2,478,808 2.6% 49.1% 1,080,021 -5.5% 48.9% 844,476 0.7% 50.3%
MNCN 3,689,544 1.8% 49.4% 1,317,449 5.6% 48.0% 636,475 -17.9% 38.8%
32
Optimistic & Pessimistic
33
Optimistic: Attractive Growth Profile
• Indonesia still attractive compared to its peers, GDP Attractive growth profile
estimated to grow to 5.3% in 2018, higher than 8.0
average Emerging, Asia Pacific and Global countries 7.0

6.8 6.6 6.4
• Indonesia’s low debt burden is a key credit strength, 6.0

5.3
which underpins our view of its sound public finances 5.0
4.9 4.8
• Inflation still within the target range of Bank 4.0 3.6
Indonesia, with core CPI reported at 2.6% and CPI at 3.0 2.5
2.2
1.9
3,2% in Feb-18 2.0
1.2
1.0
0.0
India Philipines China Indonesia Emerging Asia Pacific Global US Developed Europe Japan
Source: Bloomberg
Sound public finances Inflation still within the range

9
Japan (A+/Stable) 227.9
8
Sri Lanka (B+/Negative) 74.7
7
Pakistan (B-/Positive) 64.8
Malaysia (A-/Stable) 6
53.5
Vietnam (BB-/Stable) 5
52.7
India (BBB-/Stable) 51.7 4
Thailand (BBB+/Stable) 50.6 3
Philippines (BBB/Stable) 45.5 2
Mongolia (B/Stable) 39.69 1
Bangladesh (BB-/Stable) 31.9 0
Nov-17
Aug-14
May-14
Nov-14
May-15
May-16
May-17
Aug-15
Nov-15
Aug-16
Nov-16
Aug-17
Feb-14
Feb-15
Feb-16
Feb-17
Feb-18
Indonesia (BB+/Positive) 27.7
0 50 100 150 200 250 Core CPI CPI Lower Range Upper range
34
Pessimistic: Vulnerable to external shock
• High level of government bonds’ foreign ownership High level of foreign ownership
make Indonesia vulnerable to external shock 45.0 900
• Compare to its peers, Thailand & Malaysia, doing 40.0 800
35.0 700
business in Indonesia still difficult despite the 16 30.0 600
reform packages since Sept-15
(Rp tn)
25.0 500
(%)
• Election in 2018, will be a political noise on 20.0 400
structural reform
15.0 300
10.0 200
5.0 100
0.0 0
Jun-13
Jun-15
Jun-04
Jun-05
Jun-06
Jun-07
Jun-08
Jun-09
Jun-10
Jun-11
Jun-12
Jun-14
Jun-16
Jun-17
Dec-03
Dec-04
Dec-05
Dec-06
Dec-07
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
Dec-15
Dec-16
Dec-17
Value (RHS) Foreign ownership
Source: Asian Bonds Online
Doing business still difficult Political uncertainty

160
140
120
100
80
60
40
20
0
Ease of doing Starting Construction Getting Registering Getting credit Protecting Paying taxes Trading across
business business permits electricity property minority borders
invetors
Indonesia Malaysia Thailand
Source: World Bank Source: Detik
35
Valuation
36
Valuation: A buy at this level
 Attractive earnings yield, on the back of valuation Attractive earnings yield

discount, erase the concern on valuation risk 18 9.0%
pressure 16
8.0%
7.0%
 Indonesia trade discount compare to its peers and 14

6.0%
world market, as historically 10 years JCI traded in 12

5.0%
average with the world MSCI index, currently 10 4.0%
3.0%
discount 6.5%. 8
2.0%
6
1.0%
4
0.0%
2 -1.0%
Feb-12
Aug-15
Feb-06
Aug-06
Feb-07
Aug-07
Feb-08
Aug-08
Feb-09
Aug-09
Feb-10
Aug-10
Feb-11
Aug-11
Aug-12
Feb-13
Aug-13
Feb-14
Aug-14
Feb-15
Feb-16
Aug-16
Feb-17
Aug-17
Feb-18
Discount (RHS) Global Emerging JCI Indonesia Bonds
Source: Bloomberg
Discount compared to world equity market Trade at 1x std.dev

20 40.0% P/E +2 stdv +1 stdv Mean -1 stdv -2 stdv
18 30.0% 20.0
20.0%
16
19.0
10.0%
14
0.0% 18.0
12
-10.0%
17.0
10
-20.0%
8 16.0
-30.0%
6 -40.0% 15.0
4 -50.0%
14.0
Feb-08
Aug-14
Feb-06
Aug-06
Feb-07
Aug-07
Aug-08
Feb-09
Aug-09
Feb-10
Aug-10
Feb-11
Aug-11
Feb-12
Aug-12
Feb-13
Aug-13
Feb-14
Feb-15
Aug-15
Feb-16
Aug-16
Feb-17
Aug-17
Feb-18
Dec-13
Dec-14
Dec-15
Dec-16
Dec-17
Apr-16
Apr-14
Apr-15
Apr-17
Apr-18
Aug-13
Aug-14
Aug-15
Aug-16
Aug-17
Aug-18
Discount (RHS) Global Emerging JCI
Source: Bloomberg Source: PANS, Bloomberg
37
Investment Outlook: Valuation discount
PE PB EPS GTH ROE
NAME 2018 2019 2018 2019 2018 2019 2018 2019
GLOBAL 14.9 13.7 2.2 2.0 15.1 9.6 12.5 12.5

DEVELOPED 13.3 12.4 1.5 1.4 8.2 7.8 10.0 10.2
EMERGING 10.9 9.7 1.4 1.3 8.4 11.4 13.4 14.1
US 15.0 13.8 3.5 3.2 24.0 9.0 23.5 23.4
EUROPE 13.4 12.4 1.7 1.6 9.9 9.6 10.6 10.9
Asia Pacific 12.2 11.2 1.3 1.2 9.3 7.8 12.8 12.8
Asia ex Japan 11.3 10.2 1.4 1.3 8.2 11.1 13.2 13.2
CHINA 10.5 9.2 1.5 1.3 14.1 16.2 13.1 13.1
JAPAN 12.5 11.9 1.2 1.1 10.5 4.3 7.5 7.4
HONGKONG 13.8 12.8 1.1 1.1 7.4 9.7 9.8 10.2
INDIA 16.5 14.7 2.5 2.4 16.7 17.7 15.6 15.8
INDONESIA 13.9 12.6 2.3 2.1 12.1 11.6 17.9 18.0
SINGAPORE 11.9 11.0 1.2 1.1 15.0 8.4 10.3 10.6
THAILAND 14.3 13.3 1.9 1.7 7.9 8.1 12.8 12.7
PHILIPINES 16.3 14.3 2.0 1.8 5.5 12.3 11.3 11.6
MALAYSIA 15.5 14.1 1.6 1.5 2.9 7.7 10.6 11.2
VIETNAM 15.2 14.6 1.9 1.8 8.2 3.5 12.1 11.7
AVERAGE 13.5 12.5 1.6 1.5 10.5 10.2 12.1 12.2
38
JCI: Target 6,516 in 2018
DDM Assumption Current Bear Base Bull

Div. Yield 2.20% 2.20% 2.20%
Risk Free Rate 7.00% 6.90% 6.90%
Risk Premium 3.20% 3.20% 3.20%
5 year growth 10.00% 12.20% 13.00%
Terminal growth 8.00% 8.00% 8.00%
JCI Target 5,668 6,644 6,921
EPS 382
Hist. Valuation Current Bear Base Bull
PE Hist. Valuation 15.4 14.1 16.7 18.0
Disc/Premium -2. std dev +1. std dev +2. Std dev
JCI Target 5,391 6,394 6,895
EPS 382
Rel. Valuation Current Bear Base Bull
Average Rel.valuation 14.2 13.5 17.0 18.5
Disc/Premium -5% 20% 30%
JCI Target 5,153 6,509 7,052
Avg. JCI Target 5,404 6,516 6,956

Source: Bloomberg, PANS
39
Sector & Company Outlook
40
Top-Picks: Focus on the Value
Description EPS gth ROE PE PBV
6M trad
Comp MC (Rp tn) CP TP Upside 2019 2019 2019 2019
(Rp bn)
BBCA 592 351 24,025 25,000 4.1% 12.47 18.03 20.37 3.46
TLKM 354 396 3,510 4,200 19.7% 10.77 22.26 14.47 3.20
BBNI 147 178 7,900 11,000 39.2% 12.97 14.92 8.42 1.22
GGRM 148 61 77,025 96,000 24.6% 11.45 19.25 15.82 2.97
UNTR 138 154 36,875 42,000 13.9% 7.77 19.29 12.54 2.34
ICBP 104 30 8,950 9,800 9.5% 8.83 19.91 22.88 4.39
ADRO 63 154 1,965 2,700 37.4% 6.25 12.85 8.07 1.08
WIKA 15 31 1,675 2,500 49.3% 20.90 11.87 8.51 0.99
ITMG 32 47 28,450 37,000 30.1% 0.41 27.62 8.00 2.19
EXCL 33 39 3,130 3,500 11.8% 129.91 4.35 31.55 1.45
Average 22.17 17.04 15.06 2.33
JCI 6,895 6,097 11.6 17.12 15.72 2.36
Source: Company, Bloomberg, PANS *Date: *9 August 2018
41
Automotive (N): Weak recovery in auto sales
 Weak recovery in domestic automotive sales, as 4W Slightly recovery sales in beginning 2018
(Ribu unit)
sales in 6M18 only grew 2,2% YoY (6M17: 5,3% YoY) 120
 ASII’s market share declining in July-17 –Jun-18, 96 95 94

102102 102 101
96 97
100
96
100 94 94 93 92 94
mainly driven by aggresive sales of Xpander 90 91
88 89 88 87 85
85 86 85 85
80
 Toyota’s market share dropped to 29.3% in 6M18 66
62
(6M17: 36,7%)
59
60
 We assign NEUTRAL on the sector, mainly due to 40
tight competition and pricing pressure 20
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2016 2017 2018
Source: Gaikindo
ASII’s market share under pressure Tough competition in LSUV segment
6M18 6M17
65%
62% Others, 7.7% Others, 5.3%
Nissan, 0.9% Nissan, 1.7%
59% 60% 60%
60% 59% 59% Mitsubishi, 9.9%
58%
57% Toyota, 29.3%
56%
56% 56%
55% 55% 55% Mitsubishi, 18.1%
54% Toyota, 36.7%
55% 54%
53%
52% Suzuki, 9.7%
51%
50% 50%
50% 49% 49%
48% 48%
48%
47% 47%
46% 46%
45% Suzuki, 11.0%
Honda, 17.5%
Daihatsu, 17.1%
40%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Honda, 13.9% Isuzu, 2.0% Isuzu, 1.5% Daihatsu, 17.7%
2016 2017 2018
Source: Gaikindo, Company
42
Banks (N): Slower Loan Growth Clouds Performance
Investment loan growth is a major challenge Improving asset quality as loan restructuring done in FY17
Source: OJK, Bloomberg, PANS Source: OJK, Bloomberg, PANS
Lower margin as lending rate moves in downward trend  Government will be the major driver of the loan
growth in FY18 due to slower non-SOE’s demand.
Also, as undisbursed loans dominated by
uncommitted loans, we do not see surprising size of
disbursement in FY18.
 We believe banks will post lower margin due to
lower loan yield and limited decrease in cost of
fund
 We are anticipating the transmission of slower
growth of commodity price and depreciated Rupiah
will transmitted into limited decrease in asset
quality in FY18
Source: OJK, PANS
43
Banks: BBNI, BBCA, and BBTN as Our Top Picks
We recommend BBNI & BBTN due attractive valuation
 We recommend BBNI and BBCA. BBNI stand as our 5
top picks on the back of their attractive valuation
with fairly high ROE. While, BBCA showed up with 4
BBCA
the best asset quality and good risk management
amidst global financial sector turmoil. 3
PBV FY18
 BBNI have solid loan growth as beneficiaries of BBRI
2 BMRI
government program, which will continue to BDMN
support the bank’s interest income in FY18. BBTN
1 BBNI
0
10 11 12 13 14 15 16 17 18 19 20
Source: Company, PANS, PANS ROE FY18
..also, BBNI and BBTN for its certain demand from government ..and BBCA for a solid risk management..
Source: OJK, PANS Source: Bloomberg, PANS

44
Cement (N): Focus on Efficiency
 Cement Industry has been dwarfed by oversupply Utilization rate, 2011-2019F

('000 tons) (%)
condition, which is reflected by declining utilization 200,000

90.9 92.2
100.0
rate to 67.0% in 2017 (Avg 5yr: 83.3%). We estimate

87.3 85.4
180,000 90.0
79.4
the utilization rate will start to pick up in 2018F

160,000 80.0
72.1
67.0 68.2 68.6
140,000 70.0
 We expect limited downside from declining cement 120,000 60.0
ASP, mainly due to 1) tier-2 players aggressive 100,000 50.0
80,000 40.0
pricing should be limited due to high leverage, 2) 60,000 30.0
possibility of consolidation within players 40,000 20.0
 We maintain call NEUTRAL with preference on INTP,

20,000 10.0
0 0.0
mainly due to efficiency and company strategy to 2011 2012 2013 2014 2015 2016 2017 2018F 2019F
expand market shares. Production capacity ('000 tons) Total volume ('000 tons) Utilization rate (%) (RHS)
Source: ASI, Companies, PANS
Tier-1 vs Tier-2 market shares, 1Q16- 2M18 Market shares comparison, Jan-16 – Jun-18
'000 tons (%)
30,000 50.0
27,000 45.0
24,000 40.0
21,000 35.0
19,062
18,368
18,000 17,303 30.0
20,9%
14,676 14,809 15,219 14,755 19,6%
15,000
18,6% 14,270 25.0
15,7% 17,0% 18,0% 17,7%
18,5%
12,000 10,472 20.0
9,000 19,4% 15.0

80,4% 79,1%
81,4%
6,000 84,3% 83,0% 82,0% 82,3% 81,5% 10.0
80,6%
3,000 5.0
0 0.0
Jul-16
Jul-17
Jun-16
Jun-17
Nov-17
Jun-18
Mar-16
Apr-16
May-16
Jan-16
Aug-16
Nov-16
Dec-16
Jan-17
Apr-17
May-17
Aug-17
Dec-17
Apr-18
May-18
Feb-16
Sep-16
Feb-17
Mar-17
Sep-17
Oct-17
Jan-18
Feb-18
Mar-18
Oct-16
1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 2M18
Tier-1 Player Tier-2 Player SMGR INTP SMCB Tier-2 Player
Source: ASI, PANS Source: ASI
45
Coal Mining & Contracting (OW): Enjoying the Growth
 The global coal prices would remain elevated Newcastle coal price trend (USD/ton)
through year-end and stay well above USD95/mt 140
following global supply and demand imbalance 120
 China’s coal capacity is expected to increase in the 100
coming quarters albeit import will stay robust as 80
electricity demand spikes up during the summer 60 Avg. Price 2017: USD88.2/mt
 India coal imports may go lower in near term 40

following the start of massive solar power plants 20
and early start of monsoon season 0
Avg. Price Ytd: USD103.4/mt
 Recommendation: OVERWEIGHT with top picks
Jun-17
Apr-17
Jul-17
Apr-18
May-18
Jun-18
May-17
Mar-17
Jan-17
Aug-17
Sep-17
Nov-17
Dec-17
Mar-18
Feb-17
Jan-18
Feb-18
Oct-17
ITMG, and ADRO which rely heavily on export
market ~80% Source: Bloomberg
China coal output and import ROA, ROE, and Net Income Margin
180 35%
160
30%
140
120 25%
100 20%
80
15%
60
40 10%
20 05%
0
00%
Dec-14
Dec-12
Dec-13
Dec-15
Dec-16
Apr-13
Apr-14
Aug-14
Apr-15
Apr-16
Apr-17
Aug-12
Aug-13
Aug-15
Aug-16
Aug-17
PTBA ADRO ITMG UNTR
China Coal Import (mt) China Coal Production (mt) ROA ROE Net Income Margin
Source: Bloomberg Source: Company
46
Consumer (OW): The Surge in Optimism
 Indonesia’s fundamental economy remains intact The rise of consuming people

despite the negative sentiment from global 300
economy. Additional 85 mn on consuming class in 250
2030 would boost the consumption 110

145
200
 2018 Asian Games and presidential election season 180
to boost purchasing intention 150

195
 Our consumer coverage reported capex cycle of 100
Rp13.4 tn in 2018, (2015: Rp12.7 tn; 2016: 135

170
Rp11.1tn) 50
85
45
 Recommendation: OVERWEIGHT with top pick ICBP 0

2010 2020 2030 in 5-6% GDP scenario 2030 in 7% GDP scenario
and GGRM Consuming class Below consuming class
Source: McKenzie
Improving capex cycle Consumer recovery is under way

7,000 140
135
6,000
130
5,000
125 Average: 123.4
4,000 120
115
3,000
110
2,000 105
100
1,000
95
Apr-18
Apr-10
Oct-10
Apr-11
Apr-12
Apr-13
Jan-10
Jan-11
Oct-11
Jan-12
Jul-12
Oct-12
Jan-13
Oct-13
Apr-14
Apr-16
Apr-17
Jan-14
Oct-14
Apr-15
Jan-15
Oct-15
Jan-16
Oct-16
Jan-17
Oct-17
Jan-18
Jul-10
Jul-11
Jul-13
Jul-14
Jul-15
Jul-16
Jul-17
Jul-18
0
2013 2014 2015 2016 2017 2018
MYOR KLBF GGRM UNVR ICBP INDF HMSP BI CCI BI CCI avg BI CCIE BI CCIE avg
Source: Bloomberg, Company Source: Bloomberg
47
Industrial Estate (N): Strong Inquiry
Production would be increase coincide by consumer spending
 Patimban port and kertajati airport boost 125
appetite demand of industrial estate 120
 We expect demand on industrial estates is 115
coming from existing customer 110
 Going forward, we see that landlords keeps 105
maintain the current price. Price will be picked 100
up when sales show an increasing trend 95
01/06/2014
01/09/2016
01/09/2012
01/12/2012
01/03/2013
01/06/2013
01/09/2013
01/12/2013
01/03/2014
01/09/2014
01/12/2014
01/03/2015
01/06/2015
01/09/2015
01/12/2015
01/03/2016
01/06/2016
01/12/2016
01/03/2017
01/06/2017
01/09/2017
 We see strong inquiry industrial land and strong
recoveries from consumer spending would bring a
new expansion. We maintain call NEUTRAL, with
our top pick is BEST and SSIA Production Capacity Income
Source: Bloomberg
Investment remains strong, while GDP is less aggrresive DDI and FDI expected pick up
16 10 40%
14 Investment YoY- LHS GDP YoY- RHS YoY
9 35% DDI
12 FDI
8 30%
10
25%
8 7
6 20%
6
4 15%
5 10%
2
0 4 5%
Jul-11
Nov-14
Jul-16
Jan-09
Jun-09
Jan-14
Jun-14
Aug-08
Nov-09
Apr-10
May-12
Apr-15
May-17
Mar-08
Sep-10
Feb-11
Dec-11
Mar-13
Aug-13
Sep-15
Feb-16
Dec-16
Oct-12
0%
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17
Source: BPS, Bloomberg, PANS Source: BKPM, PANS
48
Infrastructure (OW): Cash Flow Recovery
 Infrastructure ride will still be the main theme in Higher portion of infra-spending
2018, as government allocate Rp409 tn, or 19.1% to 20.0%
18.6%
fiscal budget
18.0%
16.0% 15.2%
 Financing needs of Rp4,796 triliun, which 58,7% will 14.0%

14.2%
be funded by government, as the 36,5% needs the 12.0%

10.2%
participation from the government
9.8%
10.0%
8.7%
Cash flow issues, higher account receivables days

8.0%
 6.0%
indicating weak earnings quality 4.0% 3.2% 3.4%
3.9%
2.3%
Propose OVERWEIGHT on the sector, with WIKA as
2.1%

1.9%
2.0%
our top-pick, on the back of attractive valuation 0.0%

2012 2013 2014 2015 2016 2017F
and healthier capital structure

Source: Ministry of Finance
Positive cash flow going forward Entering high capex cycle period
5,000 200.0
150.0
0
2013 2014 2015 2016 2017
100.0
-5,000
50.0
-10,000
0.0
2013 2014 2015 2016 2017
-15,000
(50.0)
-20,000 (100.0)
WSKT PTPP WIKA ADHI WSKT PTPP WIKA ADHI
Source: MP3EI Source: Bloomberg
49
Media (N): Improving Environment
 We expect Media Sector to book better performance Consumer spending vs revenue MNCN & SCMA, 1H14-2H18F
in 2018, note that the largest contributor for (IDRbn)
10,000
(%)
5.5
Indonesia advertising category is FMCG sector 9,000

5.1 5.2
5.26
5.3
5.1
 Improving rate card in 2018, mainly due to 1) 8,000 5.0 5.0 5.0 5.1
5.0 5.0
6,827
dominate by 4 big FTA players, 2) Indonesia's rate

7,000 4.8 4.9
6,041 6,168
5,909
6,000 5,520 5,504 5,466 4.7
5,346
card is lower than other region especially Singapore
5,202 5,179
5,000 4.5
with larger population in Indonesia 4,000 4.3
3,000 4.1
 We reiterate our NEUTRAL sector rating, mainly due 2,000 3.9
to 1) improving ads volume, supported by improving 1,000 3.7
FMCG performance, 2) improving rate cards across 0

1H14 2H14 1H15 2H15 1H16 2H16 1H17 2H17 1H18 2H18F
3.5
FTA TV players. Revenue Avg GDP growth (RHS)
Source: Bloomberg, Companies
30 seconds prime time spot vs population, 2016 Market shares comparison, Jan-15 – Jul-18
(%)
350
50.0
315
45.0
Avrage population : 83mn people
280 Indonesia
40.0
245
35.0
210
mn people
30.0
175
25.0
140
Phillipines 20.0
105 Vietnam
Average price: USD23,564/30s
15.0
70 Thailand
Malaysia 10.0
35 Australia
Singapore
5.0
0
0 9,000 18,000 27,000 36,000 45,000 54,000 63,000 72,000 81,000 90,000
USD/30s
MNCN SCMA VIVA Trans
Source: Media Partner Asia Source: Nielsen, Companies
50
Metal Mining (N): Demand & Supply Imbalance
 Nickel: Positive outlook on (1) positive construction Nickel in China

boom from China, (2) constructive supply outlook, 9.0 60.0
and (3) electric vehicle development 8.0

7.0
50.0
 Tin: The price would be remain elevated following 6.0 40.0
(1) lower production from major producing 5.0

30.0
4.0
countries and (2) healthy LME tin inventory level 3.0 20.0
 Gold: Dollar weakness and real interest rate would 2.0

10.0
1.0
drive the gold price. Geopolitical tensions and lower - -
equity markets are likely to push the metal higher
Dec-12
Apr-16
Apr-17
Apr-13
Dec-13
Apr-14
Dec-14
Apr-15
Dec-15
Dec-16
Dec-17
Aug-13
Aug-14
Aug-15
Aug-16
Aug-17
 Recommendation: NEUTRAL. Top Pick: ANTM and
Nickel Ore Import (mt) Refined Nickel Import (mt) (RHS)
TINS with attractive valuation and well diversified
business Source: Bloomberg
Global tin market Gold spot & US treasury yield

3,500 14,000 1.800,0 3,50
3,000 12,000 1.600,0 3,00
1.400,0
2,500 10,000 2,50
1.200,0
2,000 8,000 1.000,0 2,00
800,0 1,50
1,500 6,000
600,0
1,00
1,000 4,000 400,0
200,0 0,50
500 2,000
- 0,00
- -
Dec-13
Dec-12
Dec-14
Dec-15
Dec-16
Apr-17
Apr-13
Apr-14
Apr-15
Apr-16
Aug-16
Aug-13
Aug-14
Aug-15
Aug-17
Oct-14
Oct-15
Oct-16
Oct-17
Jan-14
Apr-14
Apr-15
Apr-16
Apr-17
Jan-15
Jan-16
Jan-17
Jan-18
Jul-14
Jul-15
Jul-16
Jul-17
Japanese Import (mt) Chinese Import (mt) Indonesia Export (mt) Gold (US$/Troy) US Treasury Yield (%)
51
Oil and Gas (OW): What’s a Fair Price for Oil ?
• YTD 2017 brent crude oil price reached USD55.0/bbl, OPEC compliance, 2017
with average of USD50.4/bbl vis-à-vis 2016 average
price of USD43.5/bbl
Iran
Gabon
• We estimate 2018 brent crude oil price could reach Ecuador

Qatar
USD65-70/bbl, due to 1) High compliance with the Algeria
output-cut deal OPEC and others, 2) Indication from UAE

Angola
cooperation within Arab Saudi and Russia Iraq
• However, we believe further price hikes should be Kuwait

Venezuela
limited due to 1) sustained high prices could lead to Saudi Arabia
higher investments in US Shale Basins, 2) OPEC and -250.0 -200.0 -150.0 -100.0 -50.0 0.0 50.0 100.0
Russia have enough capacity to quickly reduce or Actual Increase (Cut) Target Increase (Cut)
even end the Vienna deal Source: Bloomberg
Iran and Venezuela Oil Production Crude Oil Price and OPEC events
ribu barrels/day (USD/bbl)
173rd OPEC Meeting:
4,500 120.0 166th OPEC meeting: Defending
OPEC+ Ministerial
OPEC+ deal
Meeting: Declaration of
Market Shares (Nov-14) Cooperation (Dec-16) extension (Nov-17)
4,150
3,800
100.0
Doha Meeting: No
Agreement (Apr-16)
3,750
3,450
80.0
3,100 2,840
66.2 70.2
2,750 60.0 53.7 60.4
2,330 48.2 48.3
2,400
45.9
2,050
40.0 US reinstate sanctions
on Iran Oil
1,700 1,550
20.0 172nd OPEC Meeting:
OPEC+ deal 9-month
170th OPEC Meeting :
1,350 The Algiers Accord
extension (May-17)
(Sep-16)
1,000 0.0 )
01/05/10
01/05/13
01/01/15
01/01/18
01/01/10
01/09/10
01/01/11
01/05/11
01/09/11
01/01/12
01/05/12
01/09/12
01/01/13
01/09/13
01/01/14
01/05/14
01/09/14
01/05/15
01/09/15
01/01/16
01/05/16
01/09/16
01/01/17
01/05/17
01/09/17
Crude Oil price

Iran Venezuela
Source: Bloomberg, IEA Source: Bloomberg, Investing
52
Plantations (N): Limited Upside
 We estimate average 2018F CPO price to reach MYR CPO vs soybean price, 2008-YTD 2018
2,225/ton (2017: MYR 2,787/ton), due to oversupply
condition and negative sentiment from EU and USA
 India raised import tax on CPO, lowering global export
 Trade wars between USA and China could benefit CPO
 Implementation of Biodiesel (B20) by Indonesia’s
government will increase domestic demand for CPO
Avg: MYR473/tons
 We assign sector rating to NEUTRAL supported by
expectation of production improvement, but lower
price due to uncertainty in global consumption
 Top pick: LSIP-highest palm oil extraction rate (OER) &
kernel extraction rate (KER), net cash position Source: Bloomberg, PANS
CPO - global stock to use ratio, 2009/10-2018/19 CPO - global domestic consumption
Source: USDA, PANS Source: USDA, PANS

53
Poultry (N): New Opportunities
 The government intervention to cap the broiler Chicken consumption per capita (Kg/Capita)
price with ceiling at Rp19,000/kg would reduce 50 47,5
price volatility in the coming months 45
40
 Higher local corn price has been the main worry. 35
However, the harvesting season in 2Q18 helped the 30
price fairly stable. 25
 IDR depreciation would give negative impact to debt 20
and cost structure 15 11,7

10,1 9,9 9,3
10
 Recommendation: NEUTRAL. Top pick JPFA which 5
offers attractive valuation with low net gearing and 0
diversified business model

Malaysia Phillippines Indonesia Vietnam China
Source: Company
ROA, ROE, and Net Income Margin Live bird & DOC price trend (Rp/kg)
20.0 25,000 6,000
18.0
5,000
16.0 20,000
14.0 4,000
15,000
12.0
3,000
10.0
10,000
8.0 2,000
6.0
5,000
1,000
4.0
2.0 0 0
Jul-15
Jul-16
Jul-17
May-15
Nov-15
May-16
Nov-16
May-17
Nov-17
May-18
Jan-15
Mar-15
Sep-15
Jan-16
Mar-16
Sep-16
Jan-17
Mar-17
Sep-17
Jan-18
Mar-18
-
CPIN JPFA MAIN
ROE ROA Net Income Margin

Live Bird (Rp) DOC (Rp) (RHS)
Source: Ministry of Agriculture Source: Company
54
Property Residential (N): Storm Amidst in Recovery
 Marketing sales is pushed by middle low Continuing recovery of marketing sales

18000 12000
 End user still dominating the demand on
16000
2018F by lowering ticket item regarding 14000
10000
uncertainty in political year. 12000 8000
 Expecting commercial land plots secured 10000
6000
target 2018 also protect the cash flow of 8000
6000 4000
the company.
4000
2000
 We see cycle of “booming” will be faster 2000
at the end 2018, whereas political result as 0 0
4Q12 4Q13 4Q14 4Q15 4Q16 4Q17
investor’s expectation. We maintain call
NEUTRAL, with our top pick is CTRA Marketing Sales (Rp Miliar) Unit
Source: Company, PANS
Recent property index remains strong Blended sales/unit remains strong by land plot
12000 3.5
10000 3
2.5
8000
2
6000
1.5
4000
1
2000 0.5
0 0
4Q12 4Q13 4Q14 4Q15 4Q16 4Q17
Unit Sales/Unit
Source: Central Bank Source: Company, PANS
55
Telecommunication (N): Tight competition
 Indonesia smartphone expected to grow by CAGR of More smartphone users going forward
13,5% in 2015-2019F Smartphone Users
2015 2016F 2017F 2018F 2019F
(in million)
 Tight competition in data segment, yield data China 525.8 563.3 599.3 640.5 687.7
trending down, but we estimate better second half, India 167.9 204.1 243.8 279.2 317.1
as operator raising its tariff Indonesia 55.4 65.2 74.9 83.5 92.0
 Recommend NEUTRAL, on the back strong data Japan 51.8 55.8 58.9 60.9 62.6
demand, however competition tightening, due to South Korea 33.6 34.6 35.6 36.5 37.0
Philippines 26.2 29.9 33.3 36.5 39.2
aggressive pricing. Propose EXCL as our top-pick, on
Vietnam 20.7 24.6 28.6 32.0 35.2
the back of solid data migration and solid capital
structure, and most benefitted from tariff
increased, on the back of highest portion of data
Source: eMarketer
Margin pressure from data and higher gearing cycle Data yield declining
20.0
90.0
15.0 80.0
70.0
10.0
60.0
5.0
50.0
0.0 40.0
2013 2014 2015 2016 2017
30.0
(5.0)
20.0
(10.0) 10.0
0.0
(15.0)
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18
TLKM EXCL ISAT EXCL ISAT TLKM
Source: Company Source: Company
56
PANS STOCK UNIVERSE 2018
Current Price Target Price Upside/
Companies Ticker MC (Rp bio) 6M trad (Rp bn) Rating
(Rp) (Rp) (Downside)
Sector: Telco 21.20%
Telekomunikasi Indonesia TLKM 357,840 397 BUY 3,550 4,200 18.31%
Excel Axiata EXCL 32,598 39 BUY 3,050 3,500 14.75%
Indosat ISAT 18,910 4 BUY 3,480 4,000 14.94%
Sector: Toll Road
Jasa Marga JSMR 36,217 32 BUY 4,990 5,400 8.22%
Sector: Construction
Adhi Karya ADHI 5,947 18 BUY 1,670 2,000 19.76%
Wijaya Karya WIKA 15,025 31 BUY 1,675 2,500 49.25%
Pembangunan Perumahan PTPP 12,338 32 BUY 1,990 3,000 50.75%
Waskita Karya WSKT 28,369 87 BUY 2,090 2,800 33.97%
Wika Beton WTON 3,626 5 BUY 416 500 20.19%
Sector: Property Residential
Summarecon Agung SMRA 10,820 12 BUY 750 1,010 34.67%
Alam Sutra Realty ASRI 6,524 6 BUY 332 460 38.55%
Bumi Serpong Damai BSDE 24,251 28 BUY 1,260 1,600 26.98%
Ciputra Development CTRA 18,746 15 BUY 1,010 1,400 38.61%
Pakuwon Jati PWON 26,729 20 BUY 555 705 27.03%
Sector: Banking
Bank Central Asia BBCA 589,871 354 HOLD 23,925 25,000 4.49%
Bank Rakyat Indonesia BBRI 410,742 436 HOLD 3,330 3,500 5.11%
Bank Mandiri BMRI 341,833 303 BUY 7,325 9,100 24.23%
Bank Negara Indonesia BBNI 151,054 179 BUY 8,100 11,000 35.80%
Bank Tabungan Negara BBTN 27,746 81 BUY 2,620 3,900 48.85%
Bank Danamon BDMN 67,093 24 HOLD 7,000 7,000 0.00%
Sector: Automotive
Astra International ASII 300,590 226 BUY 7,425 8,700 17.17%
Sector: Cement
Semen Indonesia SMGR 51,011 49 BUY 8,600 12,000 39.53%
Indocement INTP 55,218 33 BUY 15,000 20,000 33.33%
Source: Company, Bloomberg, PANS *Date: 9 April 2018

57
PANS STOCK UNIVERSE 2018
Current Price Target Price Upside/
Companies Ticker MC (Rp bio) 6M trad (Rp bn) Rating
(Rp) (Rp) (Downside)
Sector: Plantation
Astra Agro Lestari AALI 24,828 15 HOLD 12,900 13,900 7.75%
London Sumatera LSIP 8,870 17 HOLD 1,300 1,310 0.77%
Salim Ivomas Pratama SIMP 8,541 6 HOLD 540 550 1.85%
Sampoerna Agro SGRO 4,479 0 HOLD 2,370 2,350 -0.84%
Sector: Tobacco
Hanjaya Mandala Sampoerna HMSP 444,335 84 HOLD 3,820 4,200 9.95%
Gudang Garam GGRM 148,155 61 BUY 77,000 96,000 24.68%
Sector: Coal Mining
Bukit Asam PTBA 55,414 121 HOLD 4,810 5,000 3.95%
Indo Tambangraya Megah ITMG 32,372 47 BUY 28,650 37,000 29.14%
Adaro Energy ADRO 63,652 155 BUY 1,990 2,700 35.68%
United Tractors UNTR 134,378 154 BUY 36,025 42,000 16.59%
Sector: Metals & Mining
Vale Indonesia INCO 43,223 40 HOLD 4,350 5,000 14.94%
Aneka Tambang ANTM 22,108 65 BUY 920 1100 19.57%
Timah TINS 6,331 18 BUY 850 1,400 64.71%
Sector: Oil and Gas
Perusahaan Gas Negara PGAS 45,332 185 BUY 1,870 2,100 12.30%
Medco Energi Internasional MEDC 18,839 54 BUY 1,060 1,200 13.21%
Sector: Consumer
Unilever Indonesia UNVR 328,090 103 HOLD 43,000 53,000 23.26%
Indofood Sukses Makmur INDF 56,634 52 BUY 6,450 8,000 24.03%
Indofood CBP Sukses Makmur ICBP 104,374 28 HOLD 8,950 9,800 9.50%
Kalbe Farma KLBF 60,469 32 HOLD 1,290 1,360 5.43%
Mayora Indah MYOR 67,076 4 SELL 3,000 2,400 -20.00%
Nippon Sari Roti ROTI 5,753 2 HOLD 930 1,000 7.53%
Sector: Poultry
PT Japfa Comfeed Indonesia JPFA 26,033 8 HOLD 2,220 2,500 12.61%
PT Charoen Pokphand indonesia CPIN 81,006 27 HOLD 4,940 5,600 13.36%
Sector: Media
Surya Citra Media SCMA 30,413 24 BUY 2,080 2,700 29.81%
Media Nusantara Citra MNCN 14,847 20 BUY 1,040 1,300 25.00%
58
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PANS Market Update 2018 “Storms don’t last forever”

MARKET UPDATE 2018

Potential downside risk amidst tightening environment and financial environment

Government stimulus package (infrastructure reform, tax-amnesty, fiscal package

2018 and 2019 (2017: 3.4%). 3.0 8.0

 Inflation pick-up in some countries, on the back of 2.0 7.5

recovery in developed market and combination of 1.0 7.0

increase in inflation pick-up, this will make, equity -1.0 6.0

less attractive -2.0 5.5

Inflation pick-up Monetary policy normalization

Source: Bloomberg Source: Bloomberg

Global production grows slower.. ..trade volume and investment too..

Source: Bloomberg Source: Bloomberg

 U.S earnings is recovered, with S&P 500 grew by 10 500

18.2%, supported from energy and information 8 400

 Increasing probability of Fed rate hikes by 4 times

Source: Bloomberg Source: Bloomberg

 US economic growth is improving, indicated by US economic growth improves

Unemployment rate declining However, fiscal performance is a bit lower

Source: Bloomberg Source: Bloomberg

 Despite Euro’s quantitative easing, worth around Accelerating recovery

inflation and unemployment is improving, with 4.00

inflation reached 1.9% in May 2018, near the ECB 3.00

consensus for the Eurozone growth has risen from 1.00

1.4% to 1.8% in 2017, this also triggered ECB to end 0.00

the bonds’ buying program in December -1.00 0.00

 Unemployment is trending down in all European

Recovery in financial sector Unemployment trending down

Source: Bloomberg Source: Bloomberg

 Economic activity in Euro-Area is improving, PMI in expansion zone

Source: Bloomberg Source: Bloomberg

 China has shifted its economic Slowdown by design

as PMI reported at level of 51.2 (expansion zone) in 12.0

 China debt-to-gdp ratio reach all time high of 8.0

Still in expansion mode Poses a great risk

40 170.0 164.4 164.3

Source: Bloomberg Source: Bloomberg

Consumption will recover in a very slow

Slower growth of commodity price may give

Global asset market correction & Advanced

Low government revenue to financing

Political Years: Good and Bad Things

Unemployment rate keep declining (%) Manageable Price Level

Source: Bloomberg Source: Bloomberg

Source: Bloomberg Source: Bloomberg

Source: Bloomberg Source: Bloomberg

 Total investment growth increasing, leads to a more Investment Growth Improving

Direct Investment also Growing Foreign Investor Place More Money

Source: Bloomberg Source: Bloomberg

The Growth of Key Commodity Price Indonesia’s current account

Source: Bloomberg Source: Bloomberg

Key Economic Challenges FY18

 As a small-open economy, Indonesia is vulnerable to

1- Mar-18 2-Mar-18 3-Mar-18 8-Mar-18 1- Apr-18 2-Apr-18

Trump signed the tariff China’s tariff regulation

Normalization Phase in US’s history

Source: Bank Indonesia

Impact of External Shock: Estimated Capital Outflow (% GDP)

Source: Bank Indonesia

top loser when external’s wave come. 35

 Any good sentiments investors give to advanced 30

economies will trigger an outflow from emerging 25

8 12000 Taiwan Dolar