Market Anticipates Interest Rate

The government's policy to raise fuel prices by an average of 28.7% last
weekend will be responded by the market by selectively buying blue-chip
stocks to anticipate inflation and BI Rate.

Investors' prudent stance is estimated to make the Composite Stock Index
(IHSG) on the Indonesia Stock Exchange (BEJ) hover limitedly at 2,500
throughout this week.

Head of Research at PT Paramitra Alfa Sekuritas Pardomuan Sihombing
revealed market players were still worried about the prospect of
inflation, especially the impact on the real sector and on
social-political stability.

"On the other hand, global crude oil prices are still likely to increase,
which will boost the performances of public mining and plantation
companies," he informed.

Global crude oil price hit a new record high of US$135 per barrel last
week in the wake of weaker US dollar, security threat in Nigeria, and
speculation over tycoon in the US that would lead to supply shortage.

Pardomuan forecasted sentiment for inflation would put pressures on the
index, which would move between 2,200 and 2,513. "Next week, the index
will be under pressures from several factors."

He argued the government had to be able to secure short-term foreign funds
in the market by upping interest rate.

The Central Bank (BI) plans to organize a Board of Governors' Meeting on
June 5.

The market estimates inflation will reach a two-digit level of 12%,
triggering a necessity to raise BI rate.

"The market speculates there will be rate hike, albeit slightly, to keep
the pace with inflation. If BI retains interest rate, the market will give
negative responses."

Maintain spread

BI Rate hike was necessary to keep the negative real interest rate spread
(the spread between BI Rate and inflation) attractive.

Although the spread in Indonesia was still attractive compared to the
spreads in other countries, BI still needed to provide a premium capital
gain, he added

"This is important to prevent the risk of capital flight," told Pardomuan.

On the other hand, the central bank had to use its authority to maintain
the rupiah exchange rate since weaker currency would only create negative
sentiments toward the bourse.

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20 Banks awarded as the most efficient

(See attached file: CIMG1381.JPG)

Bisnis Indonesia

Twenty banks are selected to be the most efficient in 11 categories,
mostly in terms of assets, including three state-owned banks Bank Mandiri,
Bank Negara Indonesia (BNI), and Bank Rakyat Indonesia (BRI) in the Bisnis
Indonesia Banking Efficiency Award 2008.

As to Bisnis Indonesia economist Rofikoh Rokhim, the asset category is
aimed to provide fair assessment.

"A bank with bigger asset cannot be compared to the one with smaller
asset, except for the regional development bank (BPD), syaria bank,
foreign bank, joint venture bank and state-owned bank," he said over the
sidelines of the event here.

The state-owned bank nominated Bank Mandiri, BNI, and BRI. Bank Syariah
Mandiri won over the syaria bank category. Bank Niaga and Bank Panin are
awarded as banks with more than IDR50 trillion worth assets.

The event here was either attended by Ingo Walter, the merger and
acquisition expert from the University of New York, who delivered his
speech on Value Creation and Value Destruction in Banking and Finance. The
Central Bank of Indonesia (BI) Deputy Governor, Budi Mulya, closed the
event after presenting his paper on Bank Efficiency and Merger/Acquisition
in terms of Banking Consolidation.

Rofikoh added in general the assessment of bank efficiency is done by
comparing the operational load and operational revenue (BOPO). The ratio
is deemed the traditional approach to measure the efficiency of bank cost.

"However, measuring efficiency using BOPO sometimes has fallen short of
providing the real picture of bank efficiency condition. The result is
hard to be interpreted."

As to Rofikoh, minimizing the excessive cost to minimize the BOPO ration
might give negative influence to the bank output, including the
downgrading bank product quality.

Growth of loan

Budi Mulya said up to March the credit remains growing by28.1 percent
(y-o-y) with decreasing gross non performing loan into 4.33 percent, the
guaranteed bank asset through the CAR ratio of 18.6 percent.

"The financial system remains well maintained amidst the various
pressures. Internally, the source of pressures includes inflation threat,
fiscal sustainability, and the soaring staple food price," he said.

Externally, the source of pressures comes from the soaring global oil
price and commodity price and volatile global market condition following
the sub prime mortgage crisis.

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