Related insights
Natural resource exporters will be required to keep 100% of their foreign currency denominated earnings onshore for at least a year, according to Coordinating Minister Airlangga Hartarto, cited by local press. The spirit of this regulation is broadly consistent with the authorities’ past efforts to attract export revenue proceeds since more than a decade back. Speculation on a longer retention period was rife in recent months, as the rupiah came under pressure from a strong USD. The most recent change was introduced in 3Q23 where 30% of the export proceeds with a value of more than $250k, were required to be kept onshore at least for three months. Back then, the central bank had also offered special shorter-tenor term deposit instruments (TD Valas) with competitive returns to improve the take up, while capital gains from such deposits were not taxed. As of 19th November 2024, outstanding TD Valas reached $1.55bn (had peaked at around $2.2-2.4bn in 4Q23) according to the BI, dominated by 3M tenors, with the export proceeds channelled back into the country exceeding that amount.
While the regulation helped improve domestic USD liquidity, exporters voiced concern over cashflow challenges. Market chatter is that the authorities would offer a wider array of incentives to encourage these inflows this time around, likely covering tax, dividend, and cash collateral requirements, to compensate exporters for their longer liquidity constraint. At last week’s policy meeting, BI confirmed that its foreign currency securities (SVBI) and foreign currency sukuk (SUVBI) will also add to the pool of instruments that can be tapped for placement of foreign exchange from exports (DHE) of natural resources (SDA). Inward repatriation is likely to be accretive to reserves, helping authorities to defend against rupiah volatility, with the net impact on reserves contingent on related export financing support and monetary operations. At this juncture, official estimates of the expected total quantum of inflows are optimistic (at over $90bn), with an additional risk of softer commodity prices and weaker external demand that might hurt the scale of flows. On a broader note, a dollar pullback post-US President inauguration allowed the USDIDR to stabilise in around 16250-16350 this week (IDR is down -1.4% on YTD basis).
Topic
Explore more
E & S Macro StrategyGENERAL DISCLOSURE/ DISCLAIMER (For Macroeconomics, Currencies, Interest Rates)
The information herein is published by DBS Bank Ltd and/or DBS Bank (Hong Kong) Limited (each and/or collectively, the “Company”). It is based on information obtained from sources believed to be reliable, but the Company does not make any representation or warranty, express or implied, as to its accuracy, completeness, timeliness or correctness for any particular purpose. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained herein does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. The information herein is published for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate legal or financial advice. The Company, or any of its related companies or any individuals connected with the group accepts no liability for any direct, special, indirect, consequential, incidental damages or any other loss or damages of any kind arising from any use of the information herein (including any error, omission or misstatement herein, negligent or otherwise) or further communication thereof, even if the Company or any other person has been advised of the possibility thereof. The information herein is not to be construed as an offer or a solicitation of an offer to buy or sell any securities, futures, options or other financial instruments or to provide any investment advice or services. The Company and its associates, their directors, officers and/or employees may have positions or other interests in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking or financial services for these companies. The information herein is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident of or located in any locality, state, country, or other jurisdiction (including but not limited to citizens or residents of the United States of America) where such distribution, publication, availability or use would be contrary to law or regulation. The information is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction (including but not limited to the United States of America) where such an offer or solicitation would be contrary to law or regulation.
[#for Distribution in Singapore] This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) which is Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 65-6878-8888 for matters arising from, or in connection with the report.
DBS Bank Ltd., 12 Marina Boulevard, Marina Bay Financial Centre Tower 3, Singapore 018982. Tel: 65-6878-8888. Company Registration No. 196800306E.
DBS Bank Ltd., Hong Kong Branch, a company incorporated in Singapore with limited liability. 18th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong SAR.
DBS Bank (Hong Kong) Limited, a company incorporated in Hong Kong with limited liability. 11th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong SAR.
Virtual currencies are highly speculative digital "virtual commodities", and are not currencies. It is not a financial product approved by the Taiwan Financial Supervisory Commission, and the safeguards of the existing investor protection regime does not apply. The prices of virtual currencies may fluctuate greatly, and the investment risk is high. Before engaging in such transactions, the investor should carefully assess the risks, and seek its own independent advice.