Clogged Jakarta: Does Indonesia need a new capital?

International News
Even as he awaits official confirmation of his election to a second term, Indonesian President Joko Widodo appears to be thinking about his legacy. He’s proposing a $33 billion plan to relocate the capital far away from clogged Jakarta. The idea isn’t as crazy as it sounds. That doesn’t mean it’ll work.
Jokowi, as the Indonesian leader is known, is right to question Jakarta’s long-term viability as a capital city. The population has swollen to 30 million people and, while a new subway system offers some relief at the margins, Jakarta’s roads are plagued by chronic congestion and flooding. Indonesia’s planning minister has even warned about the potential for a pandemic, given poor sanitation. That’s not to mention the earthquakes, volcanic eruptions and tsunamis that periodically beset the country.

The president’s team is also correct that as a member of the G-20, Indonesia should have an administrative capital that functions well and can accommodate the country’s predicted rise as a major economic player. Building one from scratch would help boost Jokowi’s plans to increase infrastructure spending. The government also wants to spread development beyond Java, the island on which Jakarta is located and the source of about 60 percent of gross domestic product.
Other countries — from Malaysia to Australia, Pakistan, Myanmar, South Korea and Brazil — have created new, purpose-built centers for the machinery of government. Their example, though, illustrates the pitfalls Jokowi needs to fear.


 It’s one thing to build a more efficient capital. (The plan is for the executive branch, legislature and ministries to shift; Bank Indonesia and investment functions will remain in Jakarta.) It’s another to construct monuments to national vanity...Read More

Morgan Stanley raises 2019 targets for MSCI EM, MSCI Asia Pacific indices

Companies News

Morgan Stanley has raised the 2019 targets for the MSCI Emerging Market (EM) and MSCI Asia Pacific (excluding Japan) indices, boosting prospects for markets like India.

Aggressive stimulus by China, US Federal Reserve’s decision to put interest rate hike on hold and signs of a thaw in the US-China trade war have prompted the brokerage to take an optimistic view on the EM universe.

“The aggressive China stimulus, a longer Fed pause, positive signs for the US-China trade negotiations and a shares index inclusion lead us to raise our targets,” said Jonathan Garner, chief strategist Asia and EM, Morgan Stanley in a note dated March 10.

The target for the MSCI EM index has been raised by 8 per cent to 1,130 from 1,050. The index hovered around 1,035 on Monday. The target for the MSCI Asia ex-Japan index has been increased by 3 per cent to 540.

morganMorgan Stanley has raised 2020 earnings per share (EPS) forecast for EMs to $98.4 from $95.1. It has re-rated the MSCI EM index, assigning it forward price-to-earnings (P/E) of 11.5 times, from 11 times earlier.

It the note, the brokerage said it remains overweight on EM equities and has outlined five key drivers that will boost the markets.

Morgan Stanley says the next Fed rate hike has moved from June to December with a lower US real rates profile, and this will boost EM valuations. Also, earnings season data was “slightly better than feared”, it said.


 Within EMs, Morgan Stanley is overweight on Brazil, China, India, Indonesia and Singapore. On the other hand, it is underweight on Australia, Mexico and the Philippines.

Rupee could weaken past 75 if Modi fails to win second term: Expert

Economy & Policy:

Two of Asia’s biggest emerging economies will soon elect leaders, and wagers are already being placed on their currencies. The consensus: Indonesia’s rupiah will trump India’s rupee.
RupeeRupee It boils down to who retains power among the two pro-business incumbents. Opinion polls show Indonesian President Joko Widodo is set to win the April 17 vote, while Indian Prime Minister Narendra Modi’s position appears less secure following regional defeats for his party late last year.

“The rupiah offers a better risk-reward for investors than the rupee,” said Rainer Michael Preiss, an executive director at Taurus Wealth Advisors Pte. in Singapore. “With regard to Indonesia, our view is that consistency is good. If Modi doesn’t get re-elected, some people might think this is a negative and that could lead to more volatility in the rupee.”
The two nations are often compared as they offer high-yielding assets with large consumer bases. The duo is also vulnerable to changes in U.S. interest-rate policy.
Already a Winner

Judging by their performance this year, the rupiah is a defeats for his party late last year.
“The rupiah offers a better risk-reward for investors than the rupee,” said Rainer Michael Preiss, an executive director at Taurus Wealth Advisors Pte. in Singapore. “With regard to Indonesia, our view is that consistency is good. If Modi doesn’t get re-elected, some people might think this is a negative and that could lead to more volatility in the rupee.”


 Indonesia’s stocks and bonds have lured almost $3 billion from overseas funds since Jan. 1, while Indian assets have seen net outflows of about $100 million.