The Indonesian capital market is expected to remain optimistic, despite the challenges of economic turmoil stemming from domestic macroeconomic conditions.
Financial Education Manager, Sucor Sekuritas Hendry Wijaya, explained that the good macroeconomic conditions are illustrated by Indonesia’s inflation rate at 4.69% with core inflation at 3.04%. Bank Indonesia’s (BI) inflation target this year is 3% +/- 1%, which means that the maximum underlying inflation could be 4% and remain within the limits of BI observation.
“I estimate the possibility that inflation in 2022 will rise in the range of 5-7%,” Wijaya said at the “Opportunities Amid Turbulence” Investment Talk event hosted by D’ORIGIN Financial & Business Advisory. and IGICO Advisory on Sunday, September 4, 2022. .
With rising inflation, he said, the benchmark interest rate has the potential to increase by up to 100 basis points (bps) or 1%, from 3.5% to 4 .5% this year.
For now, it is only at the 3.75% level, after rising 25 basis points some time ago. This had an impact on Indonesian government bond yields, which firmed.
“Rising interest rates will translate into higher bond yields. If bonds go up, our bond yield spreads in the US and Indonesia will widen. Then it will invite foreign investors to enter Indonesia, influx of capital. The rupee should be more stable,” he said.
Indonesia’s economic growth in the second quarter of 2022 increased by 5.44%. He also compared the increase with other countries, such as the United States which decreased by 0.6%, the EU which only increased by 0.6%, China which saw an increase by 0.4%, Japan increased by 2.2%, Singapore decreased by -0.2% and Brazil increased by 1.2%. percent.
Indonesia’s economic growth, he continued, was strong enough to cushion the impact of rising interest rates. On the other hand, the national trade balance has been in surplus for 29 consecutive months since prices of Indonesia’s main commodities rose again.
This will support the Indonesian economy because the prices of exported products are much higher than those imported, so the terms of trade benefit Indonesia.
Currently, 30% of JCI’s market capitalization is backed by the banking or financial sector. Loan growth in the banking sector also increased rapidly, by 10.71%.
If inflation increases by 5-7% this year and economic growth reaches 5%, that means Indonesia’s nominal gross domestic product (GDP) will increase by 10-12%.
Head of Berdikari Investment Management equities Agung Ramadoni estimates Indonesia’s GDP to be stable at more than 5%. This stability is based on several factors, including fund managers who are able to draw on ample liquidity, the equity market has not reacted negatively to the contraction of US GDP for the second consecutive month and the availability of liquidity in the domestic market is still high.
“This is based on domestic sales data such as car sales data that has returned to pre-pandemic levels, retailer sales data that has continued to improve these recent months, domestic cement sales data which is still marginally positive compared to last year,” Agung explained. “Finally, real estate sales data is also starting to return to normal levels. like before the pandemic. This indicates that the Indonesian economy is quite strong and is still on track in the post-pandemic recovery phase.
Stockology chief analyst Muhammad Hamzah said Indonesia’s economic situation will now push JCI more positively. JCI needs a break at the 7,258 level.
“In my opinion, the 7,258 level should be broken in the middle of this month or even this week. Because here there is a Fibonacci time zone approaching,” he said.
Sectors to Watch
Hamzah said that there are currently four main sectors with significant growth since the start of 2022, namely energy at 65.33%, industry at 27.95%, transport at 20.41% and infrastructure at 10.21%.
Interesting sectors to note are industrials, non-cyclicals and basic materials. On the other hand, sectors to avoid include healthcare, real estate, technology, transportation and cyclicals.
“For priority sectors, finance is still quite attractive, because we are talking about the correlation of the market with foreign flows. Foreign flows in the JCI mainly take place in the financial sector. 30% of Indonesia’s market capitalization is in finance. Finance is still quite attractive. There is an energy that is certain that these months the driving catalyst energy is strong. And there is also the infrastructure because there is a new feeling, namely IKN (the new capital of Indonesia),” he said.