DJ Yudhoyono Coalition Accepts Boediono;Mkts To Benefit -Reports Growing support and a politically neutral running mate are likely to give Indonesian president Susilo Bambang Yudhoyono the he needs to push through reform and development agendas if he wins a second term in July, analysts and media reports said.
Yudhoyono has made progress in reconciling his choice, former central bank governor Boediono to smaller Islamic parties in his coalition who had previously balked at the selection, they say. This should give the Indonesia Stock Exchange more room to grow . "SBY's Democratic Party secured 148 seats or 26% in the next parliament, substantially more representation than the current 55 seats. This should give SBY more bargaining power in the parliament next term to enable him to pass bills to advance reforms," UOB Kayhian said Tuesday. The Democrat Party of Yudhoyono, who is often referred to by his initials, won almost 21% of the popular vote in parliamentary elections held April 9, triple the support it received in 2004 in Yudhoyono's first term. Polls put Yudhoyono ahead of his top rivals for July. UOB Kayhian added that the selection of Boediono as Yudhoyono's No. 2 "will ensure reforms would accelerate," adding already significant reform in customs and tax practices weree achieved in his first term. But "reform on the legal front still needs to be stepped up," UOB Kayhian said. It said the Indonesia Stock Exchange is trading at a ratio around 11.1 times 2009 price-to-earnings and has "largely priced in SBY winning the second term," but could gain about 26% more from current levels to trade at its historical average of 14 times P/E. The Jakarta composite index Tuesday was trading around 1854.312, up almost 3%. The index has gained around 37% in value so far this year. Above-target economic growth in the first quarter should provide further fillip to the index, UOB Kayhian said. Indonesia's gross domestic product grew 4.4% on year between January and April. Although that marked a slowdown in on-year growth from 5.2% in the final quarter of 2008, it was one of the fastest rates in the region. Analysts have attributed the growth in part to proactive monetary policy by Bank Indonesia, led by Boediono, and to a stimulus package worth about $6.5 billion the Yudhoyono government is implementing to support the economy. UOB Kayhian said PT Bank Danamon (BDMN.JK), Indonesia's fifth-largest lender by assets, should benefit from the current rate-cutting cycle, as should PT Indocement Tunggal Prakarsa (INTP.JK), the second-largest cement producer by output, which provides cement to the housing and infrastructure construction sectors. The bank said it targets a share price of IDR4,500 from Danamon and IDR7,500 for Indocement. Danamon Tuesday traded at IDR3,975 and Indocement at IDR6,400. State news service Antara earlier this week reported that Yudhoyono had reconciled with the strongly Islamic Prosperous Justice Party, or PKS, who had derided Boediono as a neo-liberal and market fundamentalist. Analysts have said that should PKS be unable to come to terms with Yudhoyono over the selection of Boediono, the approximately 10% of parliamentary seats the party garnered in April would add heft to an opposition coalition if they leave the Democrats' side. PKS and the three other Islamic parties, along with 18 other small parties, who together account for more than 30% of the popular vote, have accepted Boediono and will remain in coalition with the Democrats, . Antara over the weekend cited PKS president Tifatul Sembiring as saying that Yudhoyono "explained that his next government would work hard to overcome the problems of economic crisis, so he needed an expert in the fields of finance, banking and economy."
