JAKARTA:  Although the official results will not be released until the end of July, various quick count and exit poll results are consistently predicting that Indonesia’s President Susilo Bambang Yudhoyono will be re-elected in the first round and a second run-off will not be necessary.

Local media reported that as of the night of July 8, 2% of the 176 million votes have been counted and he is leading with 60.7% of the votes.

Indonesia Survey Institute shows that Susilo has captured 60.8% of the votes, with former president Megawati Sukarnoputri in second with 26.6% and current vice president Jusuf Kalla capturing 12.6% of the votes.

Other pollsters are showing similar results with Susilo getting about 60% of the votes. This implies that the president will fulfil one of the conditions of being re-elected in the first round, which is capturing more than half of the votes.

It is also likely he will be able to meet the second condition, which is to get at least 20% of votes in more than half of the 33 provinces.

The scale of Susilo victory will add to his party’s (Demokrat Party) strong performance in the April parliamentary elections and give the president a strong mandate.

The Demokrat Party will be the biggest in the next parliament (which will convene in July) and will occupy 27% of parliamentary seats vs. 11% currently. This advantage has enabled him to part with VP Kalla and the Golkar party (that will occupy 19% of the parliamentary seats) and pick ex-Bank Indonesia governor Boediono as his running mate, now vice president-elect, instead.

Furthermore, with the declining power of the Islamist parties (whose legislative influence has slipped from roughly a third to a quarter of the parliamentary seats), the secular Susilo is less dependent on them and, even if they were to become his coalition partners, he will not have to make cross-ideological compromises on sensitive issues like education.

Indeed, since secular parties (which are the political basis of all the presidential and VP candidates) will control three-quarters of parliamentary seats, Susilo’s most influential coalition partners are unlikely to have ideological differences. Susilo’s next government is likely to have broader parliamentary support, more secular and technocratic-based (with Boediono coordinating economic policies).

Market implications As the exit poll results are being rolled out, Moody’s has already spoken about the chance of an upgrade of Indonesia’s sovereign ratings.

However, it is worth noting that Moody’s sovereign credit rating for Indonesia is at Ba3 for both local and foreign currency. This is one notch below Fitch’s BB rating for both local and foreign currency and two notches below S&P’s BB+ rating for local currency (S&P’s foreign currency rating for Indonesia is at BB-).

Hence, Moody’s comments may be interpreted as a catch up move but nonetheless the smooth running of both the parliamentary and presidential elections is providing investors a strong boost.

The IMF also endorses the positive impact on foreign investor perception brought by the elections. This reinforces our view that IDR will continue to be an outperformer this year. The parliamentary and presidential elections are arguably the wild cards for the country in 2009 amid strong domestic economic performance.

Now they are mostly likely to be concluded smoothly and interpreted positively by investors. The next point of attention will be on SBY’s strategy for the next five years and how quickly fiscal spending can be implemented to support economic growth.

We maintain our overweight risk rating for the IDR both for the short term (3-6 months) and medium term (6 months+) and expect USD-IDR to reach 9,500 by end of 2009.

The resounding victory in one round should see the IDR bond market returning to trading on a buoyant mood today.

Moreover, global oil prices have receded notably in recent sessions and that should help to ease any pressure either on the inflation or fiscal front near term.

The sanguine supply profile, still benign inflation readings and favourable domestic monetary conditions are supportive to the positive environment. However, we also note that the bottom in yields may not be too far away.

The central bank already sounded its less dovish stance at the last meeting, underlining observations that we are already at the tail-end of monetary easing in Indonesia.

Nevertheless, any tightening bias is not expected to emerge any time soon. As such, we reiterate our positive prognosis on the IDR bond market.