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Spotify to test a more expensive version of its service

SPOTIFY Technology SA plans to sell a more-expensive version of its music service in Scandinavia, a test to see whether it can raise prices around the world, according to people familiar with the matter.

Spotify will raise the price of its family plan by about 13%, said the people, who asked not to be identified because the increase hasn’t been announced. The test doesn’t mean Spotify will raise prices elsewhere or do so permanently in Scandinavia, they said. The company declined to comment.

Raising prices could boost revenue in markets where Spotify already has a strong presence. The company is based in Stockholm, and its music service is the dominant player across Northern Europe. The current family plan costs about $15 a month and lets up to five people use the service. Spotify has also tested a plan called Premium Duo that offers two subscriptions for €12.49 ($13.91) a month.

Higher prices might help placate music companies, which have complained about falling revenue per user. They’ve previously questioned why Spotify doesn’t use its market-leading position to raise rates. The average price paid by Spotify subscribers has declined for a few years because of discounts to draw in new customers and growing use of family plans.

With 108 million paying customers, Spotify is the largest paid music service in the world, and it’s unlikely to surrender that crown any time soon. The company says it’s growing faster than its closest competitor, Apple Music, which also charges $15 a month for a family plan and had about 60 million customers at midyear.

But Spotify still loses money. The company has been reluctant to increase prices because it’s still in a growth stage, relying on discounts to keep customers and attract new ones as people become accustomed to streaming on-demand. While the company has grown quickly, only a minority of music listeners around the world have adopted the technology, and Spotify executives have said the addressable market is at least 1 billion people.

North America, Latin America and Europe account for more than 80% of Spotify’s customer base. The company is making a big push in Asia, where it has sold its service at low prices to compete with local players and free alternatives such as YouTube.

Spotify is also under pressure from competition. It offers more or less the same product as Apple Inc., YouTube, and Amazon.com Inc. — millions of songs available on-demand, as well as playlists and podcasts.

But Apple, YouTube, and Amazon don’t need to make money on music. They can use their music services to profitably sell other products, whether it’s iPhones, advertising, or toilet paper. Spotify doesn’t have that luxury. — Bloomberg

LRMC begins civil works on Cavite extension

THE operator of the Light Rail Transit Line 1 (LRT-1) is set to begin the civil works on the railway’s extension to Cavite next month.

In a statement yesterday, Light Rail Manila Corp. (LRMC) said it had completed the geotechnical investigation or soil testing on the LRT-1 extension last month, and may proceed with the piling works by Sept. 1.

“Civil works along the alignment from the Dr. Santos Avenue Station towards Baclaran Station, both in Parañaque City, are expected to start by Sept. 1, 2019,” LRMC Cavite Extension Project Execution Manager Reynaldo Pangilinan said in the statement.

He noted the right-of-way for the affected segment had already been acquired with the help of the Department of Transportation and Light Rail Transit Authority.

The P64.9-billion LRT-1 Cavite Extension project involves the construction of an 11.7-kilometer train line from Baclaran to Bacoor through eight new stations: Redemptorist, NAIA Avenue, Asia World, Ninoy Aquino, Dr. Santos, Las Piñas, Zapote and Niog.

The project is scheduled to partially open by the fourth quarter of 2021, with full operability seen in 2022.

LRMC is the consortium composed of Ayala Corp., Metro Pacific Light Rail Corp. (a unit of Metro Pacific Investments Corp.) and Macquarie Infrastructure Holdings (Philippines) Pte. Ltd.

MPIC is one of three Philippine subsidiaries of Hong Kong’s First Pacific Co. Ltd., the others being PLDT, Inc. and Philex Mining Corp. Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., maintains an interest in BusinessWorld through the Philippine Star Group. — Denise A. Valdez

PHirst Park Homes generates P6 billion in sales

PHIRST PARK Homes, Inc. (PPHI) has recorded P6 billion in sales from its first three affordable housing projects in Cavite, Batangas, and Laguna.

In a statement, the affordable housing brand of Century Properties Group, Inc. said it sold 3,706 units out of the 4,187 units it launched since May 2017. The residential projects are located in Tanza, Cavite; Lipa, Batangas; and San Pablo, Laguna.

“The strategic location, quality, and the affordability of our projects are the primary reasons why we are receiving an overwhelming demand to purchase PHirst Park Homes. We’ve accelerated the pace of our developments especially in the Tanza project, the third and final phase of which is now being offered ahead of schedule,” Ricky M. Celis, president of PPHI, said in a statement.

The first two phases of PHirst Park Homes Tanza is sold out, while pre-selling for the third phase has started. Land development for phase one is already 95% complete, while second phase is 87% complete as of end of July this year.

The first phase of PHirst Park Homes Lipa is now 92% sold, while first phase of PHirst Park Homes San Pablo is 74% sold.

“The sales demand mostly came from the OFWs, new families, and people who wanted to have a home because they can already afford it,” Mr. Celis said.

PHirst Park Homes is a joint venture between CPG and Mitsubishi Corp.

Safe-haven units under pressure on hopes of central bank easing

TOKYO — Safe-haven currencies such as the yen and Swiss franc were under pressure on Monday as expectations that policy makers would unleash new stimulus eased immediate concerns about a slowing global economy.

Such hopes found support from the Chinese central bank’s interest rate reforms over the weekend that are expected to lower corporate borrowing costs, and reports of new fiscal stimulus in Germany.

However, investor optimism is likely to be capped ahead of a US decision later on Monday on whether to continue to allow China’s Huawei Technologies to buy supplies from American companies.

“Huawei is a big test to see whether the current risk-on mood will continue in the currency market,” said Takuya Kanda, general manager of the research department at Gaitame.com Research Institute.

“There’s a sense of calm right now because the stimulus story is supporting the dollar against safe-havens, but I’m not sure how long this calm will last,” he added.

The dollar index, which measures the greenback against six major currencies, was marginally higher in Asia at 98.201, close to a two-week high of 98.339 reached on Friday.

Against the yen, the dollar was little changed at 106.37 yen, near a one-week high of 106.98 yen.

The yen and the Swiss franc, both of which tend to be bought as a safe-haven during times of economic uncertainty, fell slightly on Monday versus other currencies.

Risk sentiment could improve further if Washington offers some concessions to Huawei, which could make a resolution of the US-China trade war more likely.

The US government blacklisted Huawei Technologies in May, accusing the world’s largest telecom equipment maker of espionage and intellectual property theft. The allegations, which Huawei denies, were a serious escalation in the trade war.

The US Commerce Department is expected to extend a reprieve given to Huawei that permits the Chinese firm to buy supplies from US firms so that it can service existing customers, two sources familiar with the situation told Reuters on Friday.

However, President Donald Trump said on Sunday he did not want the United States to do business with Huawei for national security reasons, casting doubt over the decision.

While a rejection for Huawei could easily fuel another bout of risk aversion, risk-sensitive currencies appeared to have found some support for now.

The dollar edged higher to 0.9795 Swiss franc, approaching the highest in almost two weeks.

The euro also rose 0.2% to 1.0865 Swiss francs.

The Australian dollar drifted higher to 72.12 yen, on course for its third day of gains.

Gold, another safe-haven asset, fell 0.3% in the spot market to $1,508.40 per ounce.

The People’s Bank of China unveiled a key interest rate reform on Saturday to help steer borrowing costs lower for companies and support a slowing economy that has been hurt by the trade war with the United States.

In the onshore market, the yuan traded at 7.0447, little changed on the day. In the offshore market, the dollar rose 0.2% to 7.0577 yuan.

The details of Chinese stimulus came after German media reported that the German government may be open to running a fiscal deficit to boost growth.

Hopes for stimulus to help Germany’s economy, which is on the brink of recession, also rose after Finance Minister Olaf Scholz suggested the government is ready to spend.

Scholz said on Sunday the global financial crisis in 2008 and 2009 cost Germany roughly €50 billion ($55.45 billion), but Germany has the fiscal strength to spend a similar amount to counter any future economic crisis.

China and Germany are two major global exporters that play a crucial role in world trade, so any steps to bolster these two economies is a positive for the global economic outlook. — Reuters

‘You can still sense the love’: Baby boomers revel at Woodstock 50 years on

BETHEL, N.Y. — Baby boomers dressed in tie-dye, rolling wheelchairs and chasing a memory of peace and love flocked to Bethel, New York, for the weekend to mark the 50th anniversary of Woodstock, the music festival that defined 1960s counterculture.

Thousands of flower-crowned visitors made the journey to the Bethel Woods Center for the Arts, which now owns the original festival site, to hear some of the same musicians including Arlo Guthrie, attend a planned Saturday concert by Santana, and feel the spirit of community that the 1969 festival produced.

“Even though I’m seeing the site 50 years later, I feel like I’m there at the first concert,” said Peter Hadley, 63, who arrived on Thursday. “Everybody greets us, talks to us. It’s the love that started back in ’69 and it’s present here, now.”

Woodstock, which was held at Max Yasgur’s dairy farm in upstate New York from Aug. 15-18 and featured about 30 acts, became a logistical nightmare when more than 400,000 people showed up, causing traffic gridlock for miles.

This weekend, in stark contrast to 1969, attendees found metal detectors, indoor plumbing, and abundant food vendors at the Bethel Woods Center, which is hosting several concerts to mark the anniversary.

But those making the return trip said they had been unfazed by the chaos and unsanitary conditions in 1969, and instead remembered the kindness of locals, law enforcement, and other concert-goers who offered food and medical aid.

“Everything that could go wrong went wrong. But everything went right,” said Duke Devlin, 77, who hitchhiked to Woodstock from Texas and has lived near the festival venue ever since. “We were bombarded with bliss.”

Arlene Seymour, 69, arrived for the weekend wearing the same tie-dye shirt she bought on her way to the 1969 concert. She fondly recalled sharing food with people she had just met and sleeping in the trunk of a stranger’s car to avoid the rain.

“It just wouldn’t happen like that today,” she said. “Because of the environment in the world, people would be worried to have it so loose.”

The anniversary attracted not just baby boomers. Younger people, dressed in throwback bell-bottoms and fringes, came to experience the atmosphere they missed in 1969.

Down the road from Bethel, a more informal reunion with music was taking place to mark the weekend in a style reminiscent of 50 years ago.

“You can still sense the love,” said Michelle Lecuyer, a 53-year-old sales director from New Hampshire, who described standing on the field where rock legends like Jimi Hendrix, Joe Cocker and Janis Joplin performed as experiencing “a slice of heaven.”

Previous Woodstock anniversaries have not fostered such harmony. People threw mud at performers at a rain-drenched Woodstock ’94 in Saugerties, New York. A fire broke out at the 30th reunion in Rome, New York, and the event devolved into violence.

Last month, original Woodstock producer Michael Lang’s plans for a 50th anniversary festival fell through when the organizers failed to secure a venue and headliners including Jay-Z and Miley Cyrus dropped out.

But the gray-haired crowds gathered in Bethel were determined to have peace. Ignoring the rain on Thursday and Friday and the omens of Woodstock reunions past, they held hands in a circle around a peace sign on the lawn, smoked blunts while singing along to Arlo Guthrie, and swayed to the rhythm of their generation. — Reuters

Plastics manufacturer expands to Mindanao

DAVAO CITY — Manila-based plastics maker Manly Plastics, Inc. will soon occupy a 1.1-hectare area at the Anflo Industrial Estate (AIE) in Panabo City.

“We are bullish that this will attract more investments here in the (Davao) region and generate more revenues and employment for the locals,” Ricardo F. Lagdameo, vice- president of Damosa Land, Inc., said in a statement. AIE is owned by Damosa Land.

The plastics company is the 14th locator in the economic zone.

Founded by Co Bun Ting and his wife Co Po Ty, Manly Plastics claims to be “the largest provider of end-to-end plastic product solutions in the Philippines — capable of everything from mold engineering to fabrication, mass production to decoration.”

Manly Plastics’ AIE facility is intended to cover the Mindanao market. Among its products are those used in automobiles, appliances, beverages, electronics, furniture, and material handling.

Other locators that inked deals with AIE this year are Japanese company Packwell, Inc. and Chinese firm Zhenzhi Corp.

Other companies operating at the 63-hectare agro-industrial ecozone are Del Monte Fresh Produce Philippines, First Panabo Tropical Foods Corp., Phildutch Polymer Inc., Davao Packaging Corp., CAMECO Realty Development, PMR Pallet Ltd. Co., Fermon Corp., Southern Harvest, and Lane Holdings, Inc. — Carmelito Q. Francisco

The Enclave Alabang launches Phase 2

UPSCALE developer Filigree is launching the second phase of exclusive residential village The Enclave Alabang.

The Enclave Alabang, 13-hectare community, is located in a secluded section of Daang Hari Road. The first phase featured 169 lots on 10 hectares. For the second phase, Filigree is offering 49 lots averaging 350-500 square meters.

“The success of The Enclave Alabang is a testament to the luxury market’s appreciation of our hard work and commitment in delivering only the finest, masterplanned developments. With the second and last phase of The Enclave Alabang nearly sold out, Filigree adds another milestone to its legacy of building coveted premium properties,” Filigree head Catherine Ilagan said in a statement.

The Enclave Alabang tapped H1 Architecture as lead designer and masterplanner, AECOM Singapore for landscaping and Budji Layug and Royal Pineda for clubhouse interiors.

Nearly 40 percent of the development has been set aside for greenery. The Enclave Alabang has a central park, children’s playground, and 1,500-sq.m. clubhouse with a pool gym and function rooms.

China’s new lending benchmark to be based on medium-term rates

THE PEOPLE’S Bank of China announced a rate overhaul over the weekend which will help steer borrowing costs lower. — REUTERS

BEIJING/SHANGHAI — China’s announcement of key interest rate reforms over the weekend fueled expectations of an imminent reduction in corporate borrowing costs in the struggling economy, boosting share prices on Monday.

The People’s Bank of China (PBoC) unveiled the long-awaited reforms on Saturday to help steer borrowing costs lower and support businesses hurt by weak demand at home and a year-long trade war with the United States.

While the rate overhaul has been in the works for some time, the announcement came days after data showed the economy stumbled more sharply than expected in July, raising questions over whether more rapid and forceful stimulus may be needed.

Analysts believe the revamped loan prime rate (LPR), which will be debut on Tuesday, will be lower than the current level of 4.31%, but are divided over how much funding costs will come down and how quickly.

While China has pushed plenty of liquidity into the financial system over the past year to shore up growth and guided short-term rates down, loan demand and fresh investment has been relatively subdued amid weakening business confidence and banks’ worries of more bad loans.

Under the new mechanism, bank lending rates will be linked to the loan prime rate, which will be linked to the PBoC’s medium-term lending facility (MLF) interest rate, and that should establish a relatively smooth policy transmission mechanism, said Ma Jun, a policy adviser to the central bank.

“In the future, if the policy interest rate falls, the loan interest rate will also fall, which will help to reduce the financing cost of enterprises,” he said in remarks published on the website of state radio on Monday.

China and Hong Kong stocks rose on expectations the move will ease corporate financing pressures, but some analysts cautioned the reform may not be equivalent to cuts in bank’s actual lending rates, as banks could still charge higher rates on riskier loans to smaller, private firms.

Still, Chinese banking shares fell amid worries of lower profitability for lenders. Reactions in the bond and the yuan markets were muted

“The new system itself doesn’t guarantee the actual lending rate will be lower,” Goldman Sachs said in a report.

“But given the current situation with weak activity growth, heightened trade war risks and a strong desire by the senior leadership to lower rates, we do expect actual lending rates to go down.”

Australia and New Zealand Banking Group estimates that the reform is equivalent to making a 45 basis point (bps) loan rate cut. Societe Generale believes the reform could lead to a more modest 10-25 bps cut in the new benchmark lending rate.

Under the changes, banks must set rates on new loans using the new LPR as the benchmark for floating lending rates, rather than the PBoC’s benchmark bank lending rate.

The market’s focus will be on where the new LPR is set on Tuesday. Rates will be published on a monthly basis.

Ming Ming, head of fixed income research at CITIC Securities in Beijing, said he expects the first new rate will be set lower to narrow the yield gap between LPR and interest rate on the MLF, which is now 3.3%. That gap is currently 101 bps.

Some analysts believe the central bank could cut the one-year interest rate on the MLF in order to guide borrowing costs lower. A batch of one-year MLFs with a value of 149 billion yuan ($21.15 billion) is set to expire next Monday.

“We see chances for China to lower its MLF rate in the coming months,” said Tommy Xie, economist at OCBC Bank.

“However, we don’t see the urgency for China to cut its MLF rate in August as China may want to take a wait-and-see approach to see how markets react and digest the latest liberalization.

The PBoC launched the LPR in 2013 to reflect rates that banks charge their best clients. But the LPR has been reacting little to market demand and supply, with the one-year rate hovering just under the benchmark one-year lending rate of 4.35%.

Ma said the LPR reform will help it better reflect changes in market rates and help lower corporate funding costs.

Chinese banks’ new LPR quotations will be based on open market operations, the PBoC said over the weekend. The national interbank funding center will publish the reference rate from Tuesday and on the 20th day of each month thereafter.

Banks will set rates on new loans by adding a spread to the new LPR reference rate, the central bank said.

But existing loans will still follow the original contracts that were signed in line with the benchmark lending rate. China’s outstanding local-currency loans were at a staggering 147 trillion yuan ($20.87 trillion) at the end of July.

A massive 28 trillion yuan in long-term mortgage loans are exempt from the new scheme, analysts at Nomura note.

OCBC’s Xie said the move is a “half step” toward interest rate liberalization, and the link to the medium-term lending rate may only be temporary.

“The current liberalization focuses only on the lending rate while the deposit rate was left untouched… In the longer run, China may also need to loosen the setting of deposit rate.” — Reuters

Tiu’s PHL Infradev creates China subsidiary

PHILIPPINE Infradev Holdings, Inc. has successfully incorporated a wholly owned subsidiary in Jiangsu, China which will handle procurement processes for the company.

The Antonio L. Tiu-led firm told the stock exchange Monday that Jiangsu Rizal Infradev Co., Ltd. is now registered in the Jiangsu Province with a registered capital of $10 million.

“(The company) shall be the corporate vehicle that will be used by (Philippine Infradev) to do the procurement, financing, financial leasing, commercial trading and guarantee, among others,” it said.

Philippine Infradev first announced the plan to incorporate a China unit in June.

Earlier this year, it tapped several Chinese firms for its $3.5-billion Makati City Subway Project. These firms are Greenland Holdings Group; Jiangsu Provincial Construction Group Co. Ltd., Holdings Ltd. and China Harbour Engineering Co. Ltd.

Construction of the Makati City Subway Project, which Philippine Infradev is developing with the local government of Makati, is scheduled to begin by December.

The 10-kilometer intracity railway system will have 10 stations. Philippine Infradev will operate the subway for 50 years. Its completion is expected in 2025, by which time the train will be able to accommodate 700,000 passengers every day. — Denise A. Valdez

Netflix’s ‘bloodbath’ reputation for canceling shows? It’s overblown

JUST A few months after TV critics anointed Tuca & Bertie one of the best TV shows of 2019, series creator Lisa Hanawalt got the bad news: Netflix Inc. wasn’t ordering a second season of the animated comedy.

The show was one of two dozen that the streaming giant has canceled this year — a large number that left many in Hollywood grumbling. Yet as it turns out, Netflix is no quicker to drop shows than other networks, according to data compiled by Bloomberg. It’s the company’s huge programming budget — forecast to top $14 billion this year — that makes cancellations loom large.

Of the English-language scripted programs that debuted on Netflix from 2013 to 2017, about 19% lasted more than three seasons. That puts the company squarely in between CBS, the most-watched US TV network, and HBO, the most-popular premium cable network. Almost 50% of Netflix shows made it to season three, again comparable to HBO.

The frustration with Netflix illustrates that Hollywood is still coming to grips with the company’s new way of doing business — and the less-than-transparent data behind its decision-making. Competing networks order pilot episodes to determine a show’s potential. And they don’t churn out the same volume of shows as Netflix, so it’s easier to forget their cancellations. The same year HBO released Game of Thrones, it introduced a trio of programs that lasted only a couple seasons. Until a few years ago, Netflix had never made a TV series.

Netflix bases its decisions on numbers just like most TV networks. But the metrics differ from the usual Nielsen data shared widely in the industry, according to Netflix employees, TV producers and executives who’ve worked with them. And unlike traditional broadcasters the company doesn’t provide much information about what drives decisions.

The company declined to comment for this story, but Chief Content Officer Ted Sarandos says Netflix is changing. “We are being much more transparent with creators and increasingly with the public in terms of what’s being viewed on Netflix,” he said earlier this month. “I think people use a lot of different inputs to figure out what they want to see, and popularity is definitely one of them.”

Netflix does judge programs based on the number of viewers and how much time they spend watching a show. But that’s only part of the equation. It uses its own calculation — dubbed efficiency — to measure the value of a show relative to its cost. The longer a show is on the air, the higher the cost and the higher the hurdle for renewal.

The popularity of most programs on the streaming service peaks in season one and falls thereafter — sometimes sharply. The majority of Netflix shows end after two or three seasons.

Netflix has historically prized shows that attract subscribers, since the company’s primary goal is signing up new users. When viewers watch a particular show in their first month as customers, it suggests that program drew them in. Netflix also values shows more if viewers finish a season or don’t stray to other programs.

Seasons two and three are key dividing lines for another reason. Customers who subscribe to Netflix for a couple years are far less likely to cancel than those who are new. Thus, shows that have lasted a couple seasons have already served their purpose of securing a long-term user.

Netflix could placate producers — and the agents who make their deals — by sharing more information. But the service is commercial-free, and the company argues such numbers only matter to advertisers who buys spots based on the size of a show’s audience.

As a result, show creators often have few insights into who watches what when they sit across the table from Netflix executives. The company gives them some news but not the full picture. Still, in some cases it will deploy data to lure someone it really wants, like producer American Horror Story producer Ryan Murphy.

Not everyone objects to the lack of data. “I’m thrilled I got to tell stories I wanted to tell without any hindrance,” said Neal Baer, who produced Designated Survivor, a thriller featuring Kiefer Sutherland. “It’s such a numbers game, out of my control.”

Netflix acquired the rights to the show after it was canceled by ABC, which aired the first two seasons. Baer oversaw production of 10 more episodes — about half the number of a season on ABC — and was allowed to take more risks with the storytelling.

Netflix officials are sensitive to criticism that the company isn’t as talent-friendly as some rivals, and in recent years has held viewership update calls with producers and outside studios, and released some viewership data publicly. The Emmy-nominated When They See Us, about young black men falsely accused of a brutal attack in New York’s Central Park, was seen by 25 million households in its first four weeks, while the dramedy Dead to Me was watched by 30 million over a similar time span. But Netflix doesn’t offer such numbers for all its programs.

Executives who work with Netflix say the company’s strategy changes quickly, and that the cancellation data may look far different in a few years. Still, with a budget that dwarfs the spending at other networks, Netflix will be delivering more bad news to show creators and fans who feel their favorite programs died too soon, even if the company’s cancellation rate stays close to those of competitors.

The decision to drop Tuca & Bertie confused critics and viewers, including one fan who started a petition to save the show and collected more than 25,000 signatures. Subscribers have mounted similar campaigns for Santa Clarita Diet and One Day at a Time, two more casualties of what one media outlet dubbed a “bloodbath.”

“I still get daily messages and tweets from viewers who connect personally to the characters and stories,” Hanawalt wrote on Twitter. “None of this makes a difference to an algorithm.” — Bloomberg

Holcim soil stabilization tech used for Capas project

HOLCIM Philippines, Inc. said its soil stabilization technology is being used for the seven-hectare parking lot of the Aquatic Center in New Clark City in Capas, Tarlac.

“The innovative building solution helps prevent durability issues and delays caused by inclement weather so it can be available in time for the 2019 Southeast Asian Games (in November),” the company said in a statement.

Soil stabilization is done to make the base sturdier and less prone to erosion caused by inclement weather.

“This is the biggest project thus far to use soil stabilization technology. We are confident it will deliver the promised benefits which will support our efforts to make the technology more widely used in the country,” Holcim Philippines Head of Infrastructure John Edward Reyes said.

Holcim Philippines is currently working with the Department of Public Works and Highways-Bureau of Research Standards for the accreditation of its soil stabilization technology in government road projects.

Bank Indonesia seen keeping rupiah bears at bay

INDONESIA’S RUPIAH has braved headwinds both at home and abroad to escape largely unscathed in the recent emerging-market (EM) sell-off, and the nation’s central bank is largely to thank for that.

Bank Indonesia’s (BI) repeated interventions to maintain currency stability have helped soothe investor nerves, with the rupiah’s 0.8% loss this quarter making for the second-best performance among Asian EM currencies.

Last year’s aggressive rate hikes mean rupiah-denominated government bonds continue to offer the highest yields among major regional markets, though global growth worries now seem to be weighing on demand at auctions.

As renewed uncertainty around the US-China trade relations threatens to unleash more pain in markets, focus is turning to BI’s policy decision on Aug. 22, with expectations it will keep rupiah bears at bay by holding interest rates steady amid a pickup in EM volatility. The central bank cut the benchmark last month for the first time in almost two years.

“Despite recent easing and dovish rhetoric from Governor Perry Warjiyo, we expect the central bank to be on hold in terms of rate cuts given the recent upswing in pressure on the Indonesian rupiah,” according to an ING Groep NV report.

“The stability of the nation’s currency will be integral in determining the timing of the next rate cut.”

Bank Indonesia will hold the seven-day reverse repurchase rate at 5.75% on Thursday, according to the median estimate in a Bloomberg survey of 10 economists.

Even a cut to 5.50%, as predicted by some, will mean it remains the highest inflation-adjusted policy rate in the region, according to Citigroup Inc., which is forecasting a reduction.

With yields around the world tumbling to fresh lows with each passing day, the attractiveness of the 7.43% rate on the nation’s 10-year bonds is bolstered even as investors become wary about emerging-market assets.

TOTAL RETURN
Investing in rupiah will earn more than 7%, including interest, by the second quarter of 2020, the best total return in Asia, according to estimates compiled by Bloomberg.

Southeast Asia’s largest economy is forecast to grow 5.3% next year, President Joko Widodo said Friday in his annual budget speech. That would be the fastest pace since 2013.

While global funds have been net sellers of rupiah bonds in August following last month’s easing, their net purchases of the securities so far in 2019 — at $7.7 billion — are set to be the second-highest in five years.

Technical indicators signal that the dollar-rupiah’s 200-day moving average is currently capping a rally in the currency pair, which was down 0.2% at 14,248 as of 3:45 p.m. in Jakarta on Friday. Its upside in the near term is also seen limited due to additional resistance layered between the May 22-high of 14,528 and the Dec. 11, 2018-high of 14,655. — Bloomberg

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