Asia Credit:Monday Tidbits-Indo trip takeaways

We were in Jakarta early last week meeting most of HY corps (Alam Sutera,Lippo, Modernland, Indika, BUMA, Gajah, Pan Brothers, Multipolar, MPM andSTP) and select quasi-sovereign companies (Pertamina and PLN). Overalltakeaways were mixed as macro sentiments continue to be relatively sanguineespecially given the backdrop of recent positive rating action.

    Government/Infrastructure spending was the buzzword and indeed Quasisovereigncompanies we met also mentioned accelerating capex spending runrate in 2H16. However, we are yet to see if this is normal seasonality orwhether higher capex spending rate continues in 1H17. IDR depreciationconcern almost did not come up in any meeting despite global macro risks.

    That said, current political uncertainties did come up in most meetings as thenear term headwind for policy actions and broad-based recovery. As a result,most HY companies are forecasting flat to marginally higher revenue andprofitability in 2017 with investment/capex plans still subdued (excludingmining companies). We also note that supply, if any, from quasi-sovereign wemet may be skewed towards 2H17 depending upon actual capex budgetutilization. Please see below our broad sectoral takeaways.