The Foreign Effect. Foreign holdings in Gov t bonds declined

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1 WEEKLY REPORT D E B T R E S E A R C H 10 OCTOBER 2017 The Foreign Effect Indonesia s Sovereign Rating S & P Moody s Fitch Analyst Rifki Rizal (62 21) ext rifkir@danareksa.com Please read important disclosure at the back of this report BBB- Baa3 BBB- Key Market Indicator as of 09-Oct-17 BI 7-Day RR Rate 4.25% JCI 5,915 IDR Inflation (y-o-y)-sep % Domestic Bonds Outstanding Gov t Bonds as of 09-Oct-17 IDR 2,060.7 bn Corp Bonds as of 30-Sep-17 IDR bn Previous Week Trading Volume Government Bonds IDR tn Corporate Bonds IDR 4.85 tn Benchmark Yield as of 09-Oct-17 FR0061 (5 year) 6.193% FR0059 (10 year) 6.533% FR0074 (15 year) 7.125% FR0072 (20 year) 7.323% Source : Bloomberg, Mid YTM Government Bond Indices as of 09-Oct-17 Index (Bloomberg : DGBIIDPR) Yield Index (Bloomberg : DGBIIDYD) 6.23% TR Index (Bloomberg : DGBIIDTR) Adjusting portfolios The Government bonds market tended to move sideways last week. As a result, the 10-year yield benchmark (FR0059) ended the week at 6.49% or up slightly by 4bps compared to its level the previous week. The slightly higher yield might be a reflection of selling by foreign investors. Historically, the growth in foreign holdings tends to slow in the 4th quarter due to adjustments which foreign investors make in preparation for the following year. Foreign holdings in Gov t bonds declined Foreign holdings of Government bonds declined. As of 6 October, the net selling of foreign investors amounted to IDR14.55 trillion. This reduced their holdings to IDR trillion (39.7% of the total outstanding) from its highest position in September. However, compared to the end of 2016, foreign holdings in 2017 grew by IDR145.9 trillion (or USD10.8 billion). Meanwhile, the IDR/ USD exchange rate weakened from IDR13,472 per USD to IDR13,518 per USD or 0.35% depreciation over the week. By contrast to the decline in foreign holdings, domestic bank holdings (excluding Reverse Repo BI) increased significantly by IDR18.3 trillion to IDR447.8 trillion during the same period. Furthermore, insurance and pension fund holdings went up by IDR1.4 trillion and IDR708 billion, respectively. New limit Last week, the Securities and Exchange Board of India (SEBI) decided to increase its Foreign Portfolio Investments (FPIs) in the Government Bonds of India to INR250,000 crore (USD38.2 billion) consisting of INR189,700 crore (USD29 billion) of General FPI and INR60,300 crore (USD9.2 billion) of long-term FPI coming from Pension Funds, Insurance companies etc. Previously, the total investment limit for FPIs only reached INR242,000 crore (USD37 billion). In other words, there was an increase in the limit of INR8,000 crore (USD1.2 billion). (Exhibit 1). Foreign investor demand for Indian government bonds has increased significantly this year. As of 6 October 2017, foreign net buying reached INR134,749 crore (USD20.6 billion) in the Indian bond market. In 2016, FPIs recorded net selling of INR43,647 crore (USD6.7 billion). Penyesuaian portofolio Pasar obligasi Pemerintah cenderung bergerak sideways selama minggu lalu. Yield benchmark 10-tahun (FR0059) menutup akhir minggu lalu di level 6,49%, atau naik tipis sebesar 4bps dibandingkan dengan penutupan minggu sebelumnya. Hal ini diperkirakan terjadi akibat aksi jual investor asing selama minggu lalu. Secara historikal, pertumbuhan kepemilikan asing cenderung melambat di kuartal 4 terkait adjustment yang biasanya mereka lakukan sebagai persiapan untuk tahun depan. Kepemilikan asing pada obligasi Pemerintah menurun Kepemilikan asing di obligasi Pemerintah Indonesia mengalami penurunan. Per 6 Oktober, investor asing mencatatkan net sell sebesar IDR14,55 triliun menjadi IDR811,72 triliun (39.7% dari total outstanding) dari posisi tertinggi di bulan September. Jika dibandingkan dengan posisinya di akhir tahun 2016, kepemilikan asing selama tahun 2017 mengalami peningkatan sebesar IDR145,9 triliun (atau USD10,8 miliar). Di sisi lain, nilai tukar Rupiah terhadap Dollar mengalami pelemahan dari IDR per USD menjadi IDR per USD, atau melemah 0,35% sepanjang minggu lalu. Berbeda dengan investor asing, kepemilikan Bank domestik (tidak termasuk Reverse Repo BI) meningkat signifikan sebesar IDR18,3 triliun menjadi IDR447,8 triliun selama periode yang sama. Selain itu, kepemilikan asuransi dan dana pensiun masing-masing meningkat sebesar IDR1,4 triliun dan IDR708 miliar. Batas baru Pada minggu lalu Securities and Exchange Board of India (SEBI) memutuskan untuk menaikkan limit untuk Foreign Portfolio Investors (FPIs) di obligasi Pemerintah India menjadi INR crore (USD38,2 miliar) yang terdiri dari INR crore (USD29 miliar) untuk FPI secara umum dan INR crore (USD9,2 miliar) untuk FPIs Jangka Panjang seperti Dana Pensiun, Asuransi dsb. Sebelumnya, total limit investasi untuk FPIs hanya mencapai INR crore (USD37 miliar), atau dengan kata lain ada tambahan limit sebesar INR8.000 crore atau sebesar USD1,2 miliar. (Exhibit 1). Permintaan investor asing terhadap obligasi Pemerintah India meningkat signifikan tahun ini. Per 6 Oktober 2017, investor asing mencatatkan net buy di pasar obligasi India sebesar INR crore (USD20,6 miliar) selama tahun Sementara itu, FPIs mencatatkan net sell sebesar INR crore (USD6,7 miliar) di sepanjang tahun Bloomberg Ticker: DFMJ

2 Exhibit 1. Revised foreign portfolio investment debt limit Type of Instrument Upper Cap Revised Upper Cap Changes as of 4 Jul 17 as of 3 Oct 17 in INR cr in USD bn* in INR cr in USD bn* in INR cr in USD bn* Government Debt - General 187, , , Government Debt - Long Term 54, , , State Development Loans - General 28, , , State Development Loans - Long Term 4, , , Total 275, , , *as of 6 Oct 17 USD INR Bloomberg : Source: Securities and Exchange Board of India Exhibit 2. Foreign ownership in IDR tradable Goverenment bonds (IDR trillion) Source: MoF * Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec **as of 6 Oct Exhibit 3. Monthly FPI net investment 2017 Calendar Year INR crores Equity Debt Total January (1,177) (2,319) (3,496) February 9,902 5,960 15,862 March 30,906 25,355 56,261 April 2,394 20,364 22,758 May 7,711 19,155 26,866 June 3,617 25,685 29,302 July 5,161 18,867 24,028 August (12,770) 15,447 2,677 September (11,392) 1,349 (10,043) October ** (551) 4,886 4,335 Total , , ,550 **as of 6 Oct 17 Source: Securities and Exchange Board of India 2

3 Appendix 1. Government Bonds Trading Oct 2017 Last Trade Bonds Maturity Coupon Tenor Last Freq Vol Yield Tenor Modified Data Done (IDR bn) Class Duration 6-Oct-17 SPN Oct < 1yr - 6-Oct-17 ORI Oct < 1yr - 6-Oct-17 SPN Oct < 1yr - 4-Oct-17 SPN Nov < 1yr - 4-Oct-17 SPN Nov < 1yr - 5-Oct-17 SPN Dec < 1yr - 6-Oct-17 SPN Dec < 1yr - 5-Oct-17 SPN Jan , < 1yr - 5-Oct-17 PBS Jan , < 1yr Oct-17 SPN Feb , < 1yr - 6-Oct-17 SR Mar < 1yr - 5-Oct-17 SPNS Mar < 1yr - 5-Oct-17 SPN Apr , < 1yr - 3-Oct-17 SPN May < 1yr - 6-Oct-17 FR May < 1yr Oct-17 SPN Jun < 1yr - 3-Oct-17 SPN Jul < 1yr - 4-Oct-17 VR Jul < 1yr Oct-17 SPN Aug < 1yr - 5-Oct-17 SPN Sep < 1yr - 6-Oct-17 FR Sep < 1yr Oct-17 ORI Oct yr - 5yr - 6-Oct-17 SR Mar yr - 5yr - 6-Oct-17 FR Apr , yr - 5yr Oct-17 PBS May , yr - 5yr Oct-17 FR Sep yr - 5yr Oct-17 ORI Oct yr - 5yr - 6-Oct-17 SR Mar yr - 5yr - 4-Oct-17 PBS Sep yr - 5yr Oct-17 FR Nov yr - 5yr Oct-17 PBS May yr - 5yr Oct-17 FR Jun yr - 5yr Oct-17 FR Jul , yr - 5yr Oct-17 FR May , yr - 5yr Oct-17 FR Jun yr - 5yr Oct-17 FR May yr - 10yr Oct-17 FR Jul yr - 10yr Oct-17 PBS Aug yr - 10yr Oct-17 FR Mar , yr - 10yr Oct-17 FR Sep yr - 10yr Oct-17 FR Sep yr - 10yr Oct-17 FR Sep , yr - 10yr Oct-17 FR May , yr - 10yr Oct-17 FR Jul yr - 10yr Oct-17 FR Feb > 10yr Oct-17 FR May > 10yr Oct-17 FR Mar , > 10yr Oct-17 FR Aug > 10yr Oct-17 FR May , > 10yr Oct-17 FR Jul > 10yr Oct-17 PBS Nov > 10yr Oct-17 FR Jun > 10yr

4 Appendix 2. Government Bonds Trading Oct 2017 (cont d) Last Trade Bonds Maturity Coupon Tenor Last Freq Vol Yield Tenor Modified Data Done (IDR bn) Class Duration 6-Oct-17 FR Aug , > 10yr Oct-17 FR May > 10yr Oct-17 FR Mar , > 10yr Oct-17 FR May , > 10yr Oct-17 FR May > 10yr Oct-17 FR May , > 10yr Oct-17 FR Jul > 10yr Oct-17 FR May > 10yr Oct-17 FR Apr > 10yr Oct-17 FR Feb > 10yr Oct-17 FR May > 10yr

5 Appendix 3. Corporate Bonds Trading Oct 2017 Last Trade Bonds Maturity Coupon Tenor Rating Last Freq Vol Yield Modified Data Done (IDR bn) Duration 2-Oct-17 ASDF03ACN2 28-Oct idaaa Oct-17 ASDF02BCN4 29-Oct idaaa Oct-17 BNGA01BCN1 30-Oct idaaa Oct-17 MDLN02B 27-Dec ida Oct-17 NISP01CCN2 10-Feb idaaa Oct-17 TAFS02ACN2 24-Feb idaa Oct-17 BFIN03ACN2 12-Mar A+(idn) Oct-17 ASDF03ACN3 13-Mar idaaa Oct-17 ADHI01ACN2 15-Mar ida Oct-17 MEDC01CN2 15-Mar idaa Oct-17 PTPP01CN1 19-Mar ida Oct-17 BBIA01B 1-Apr AAA(idn) Oct-17 WOMF01BCN3 2-Apr AA(idn) Oct-17 IMFI02ACN4 3-Apr ida Oct-17 AISA01 5-Apr ida Oct-17 SANF02ACN2 10-Apr AA(idn) Oct-17 BBRI02ACN2 16-Apr idaaa Oct-17 FIFA02BCN1 24-Apr idaaa Oct-17 FIFA03ACN1 6-May idaaa Oct-17 SIEXCL01ACN2 8-May AAA(idn) Oct-17 BSDE01CN2 5-Jun idaa Oct-17 ISAT02ACN1 10-Jun idaaa Oct-17 APLN01CN1 27-Jun ida Oct-17 BNLI02SB 28-Jun idaa Oct-17 PTHK01B 28-Jun ida Oct-17 BPFI01BCN1 28-Jun idbbb Oct-17 ADMF03ACN1 30-Jun idaaa Oct-17 SMFP04ACN1 30-Jun idaa Oct-17 ASDF02BCN5 2-Jul idaaa Oct-17 BSMT01SB 5-Jul ida Oct-17 SMFP03BCN1 7-Jul idaa Oct-17 ADMF03BCN2 25-Aug idaaa Oct-17 NISP02ACN2 2-Sep idaaa Oct-17 BNGA02ACN2 3-Sep idaaa Oct-17 ADMF02CCN2 24-Oct idaaa Oct-17 TAFS01BCN3 6-Nov idaa Oct-17 BNGA01CCN2 20-Nov idaaa Oct-17 BNII01SBCN1 6-Dec AA(idn) Oct-17 SMRA01CN1 11-Dec ida Oct-17 ANTM01ACN1 14-Dec ida Oct-17 BEXI01CCN1 20-Dec idaaa Oct-17 WOMF01BCN4 22-Dec AA(idn) Oct-17 BBRI01BCN2 4-Feb idaaa Oct-17 IMFI02BCN3 16-Mar ida Oct-17 FIFA02BCN3 5-Apr idaaa Oct-17 MYOR04 9-May idaa Oct-17 ASDF03BCN1 11-May idaaa Oct-17 TUFI02ACN2 1-Jun idaa Oct-17 BEXI03BCN1 8-Jun idaaa Oct-17 SANF02BCN1 9-Jun AA(idn)

6 Appendix 4. Corporate Bonds Trading Oct 2017 (cont d) Last Trade Bonds Maturity Coupon Tenor Rating Last Freq Vol Yield Modified Data Done (IDR bn) Duration 5-Oct-17 WSKT02CN1 10-Jun ida Oct-17 BNLI01SBCN1 15-Jun idaa Oct-17 TAXI01 24-Jun ida Oct-17 WOMF02BCN1 24-Jun AA(idn) Oct-17 ISAT08A 27-Jun idaaa Oct-17 BVIC02SB 27-Jun idbbb Oct-17 DILD02A 29-Jun ida Oct-17 SMAR01BCN1 3-Jul AA(idn) Oct-17 IIFF01A 19-Jul idaaa Oct-17 ADMF03BCN4 26-Jul idaaa Oct-17 BEXI03BCN2 25-Aug idaaa Oct-17 FIFA02BCN4 27-Sep idaaa Oct-17 IMFI02CCN2 6-Nov ida Oct-17 SMII01ACN1 18-Nov idaa Oct-17 BEXI03BCN3 22-Nov idaaa Oct-17 SIISAT01BCN1 12-Dec idaaa Oct-17 ISAT01BCN1 12-Dec idaaa Oct-17 PNBN01SBCN1 20-Dec idaa Oct-17 AKRA01B 21-Dec idaa Oct-17 PPLN11B 12-Jan idaaa Oct-17 BEXI03BCN4 23-Feb idaaa Oct-17 BEXI02CCN5 13-Mar idaaa Oct-17 ADHI01BCN2 15-Mar ida Oct-17 ADMF03BCN5 22-Mar idaaa Oct-17 MEDC02ACN4 30-Mar idaa Oct-17 TUFI03ACN2 6-Jun idaa Oct-17 SIAGII01ACN1 6-Jun A-(idn) Oct-17 BVIC03SB 27-Jun idbbb Oct-17 MDLN01BCN1 7-Jul ida Oct-17 IMFI03BCN1 7-Jul ida Oct-17 AKRA01ACN1 7-Jul idaa Oct-17 PNMP02ACN1 12-Jul ida Oct-17 PIHC01ACN1 12-Jul AAA(idn) Oct-17 BBTN03ACN1 13-Jul idaa Oct-17 ADMF03BCN6 14-Jul idaaa Oct-17 BEXI03ACN5 15-Aug idaaa Oct-17 WOMF02BCN2 22-Aug AA(idn) Oct-17 NISP02CCN2 22-Aug idaaa Oct-17 BNGA02BCN2 23-Aug idaaa Oct-17 BBRI02ACN3 24-Aug idaaa Oct-17 ADMF03CCN2 25-Aug idaaa Oct-17 WSKT01BCN2 16-Oct ida Oct-17 SMRA02CN1 16-Dec ida Oct-17 BBRI01CCN3 25-May idaaa Oct-17 TUFI02BCN2 1-Jun idaa Oct-17 APOL02B 30-Jun Oct-17 PPRO01B 1-Jul ida Oct-17 TBIG02CN1 1-Jul AA-(idn) Oct-17 SIAISA02 19-Jul ida Oct-17 IIFF01B 19-Jul idaaa Oct-17 TELE01CCN2 14-Oct ida Oct-17 PNBN02CN2 27-Oct idaa

7 Appendix 5. Corporate Bonds Trading Oct 2017 (cont d) Last Trade Bonds Maturity Coupon Tenor Rating Last Freq Vol Yield Modified Data Done (IDR bn) Duration 5-Oct-17 ANTM01BCN1 14-Dec ida Oct-17 ADMF03CCN5 22-Mar idaaa Oct-17 BBTN01CN1 5-Jun idaa Oct-17 MEDC02CCN5 14-Jun idaa Oct-17 LTLS02CN1 21-Jun ida Oct-17 ADHI02CN1 22-Jun ida Oct-17 BLAM04 7-Jul ida Oct-17 BMTR01ACN1 7-Jul ida Oct-17 PPLN12B 8-Jul idaaa Oct-17 BBNI01CN1 11-Jul idaaa Oct-17 BMTP01B 11-Jul AA(idn) Oct-17 BNII02ACN1 11-Jul idaaa Oct-17 PNMP02BCN1 12-Jul ida Oct-17 ADMF03CCN6 14-Jul idaaa Oct-17 BBRI02BCN3 24-Aug idaaa Oct-17 BACA02SB 15-Jan idbbb Oct-17 SIBMTR01BCN1 7-Jul ida Oct-17 PNBN02SBCN2 17-Mar idaa

8 Director of Debt Capital Market Budi Susanto ext FIXED INCOME TEAM Telp No Fax No DEBT RESEARCH TEAM Head of Debt Research (ad interim) Market Analyst Amir A. Dalimunthe Rifki Rizal ext ext Credit Analysts Production & Database Management Ayesha Ardelia Eka Nuraini ext ext Arif Sentanu ext Laras Nerpatari Suilyas ext DEBT CAPITAL MARKET TEAM Telp No Fax No /25 Head of Debt Capital Market Anung Rony Hascaryo ext Debt Sales & Brokerage Debt Trading & Investment Setyo H. Purnomo Romi Mulyadi ext ext Rina Rimawati D Indra Figrachanda rina@danareksa.com ext indraf@danareksa.com ext Putrika Mayadipta Rachmat Eko Putranto putrikam@danareksa.com ext rachmat.putranto@danareksa.com ext Hernita Dwi Ariesandhy hernitada@danareksa.com ext Citra Isramij P. citra.isramij@danareksa.com ext DISCLAIMER The information contained in this report has been taken from sources which we deem reliable. However, none of P.T. Danareksa Sekuritas and/or its affiliated companies and/or their respective employees and/or agents makes any representation or warranty (express or implied) or accepts any responsibility or liability as to, or in relation to, the accuracy or completeness of the information and opinions contained in this report or as to any information contained in this report or any other such information or opinions remaining unchanged after the issue thereof. We expressly disclaim any responsibility or liability (express or implied) of P.T. Danareksa Sekuritas, its affiliated companies and their respective employees and agents whatsoever and howsoever arising (including, without limitation for any claims, proceedings, action, suits, losses, expenses, damages or costs) which may be brought against or suffered by any person as a results of acting in reliance upon the whole or any part of the contents of this report and neither P.T. Danareksa Sekuritas, its affiliated companies or their respective employees or agents accepts liability for any errors, omissions or misstatements, negligent or otherwise, in the report and any liability in respect of the report or any inaccuracy therein or omission therefrom which might otherwise arise is hereby expresses disclaimed. The information contained in this report is not be taken as any recommendation made by P.T. Danareksa Sekuritas or any other person to enter into any agreement with regard to any investment mentioned in this document. This report is prepared for general circulation. It does not have regards to the specific person who may receive this report. In considering any investments you should make your own independent assessment and seek your own professional financial and legal advice. 8