Top-10 investment strategies for 2019: #3


#3 Long Indonesian equities
Joanne Goh11 Jan 2019
Photo credit: AFP Photo


The performance of Indonesia’s equity market in 2018 was largely affected by rising US rates, higher US Treasury yields, and stronger USD. Some of these external pressures could start to improve, especially the oil price to which Indonesia is highly sensitive.

Global growth is expected to slow down in 2019. But the downgrades to Indonesia’s growth forecast should be quite minimal as its economy is less cyclical compared to other North Asian markets. By now, investors should have also gotten used to the low 5% GDP growth for Indonesia as it has been consistently growing at this pace in the last five years, driven by steady consumption. We expect GDP growth in 2019 to improve just slightly to 5.2% vs. our forecast of 5.1% in 2018. Domestic consumption is expected to benefit from the populist approach running up to the election in April 2019.

Meanwhile, the rupiah touched its all-time low in early 4Q18. While still faced with the challenge of twin deficits undermining its external balance sheet strength, a less hawkish Fed would somewhat help to stabilise and even lift the bond market and currency.

We believe the bulk of outflow in Indonesia has already happened and the market should be relatively under-owned. The upcoming presidential election in April 2019 is unlikely to be a big surprise risk factor as it is going to be a repeat between Jokowi and Prabowo, as in 2014. On the contrary, one can expect domestic consumption to benefit from the pre-election populist approach.

Indonesian equity foreign outflows, annual and cumulative — Unprecedented in 2018


Source: Bloomberg Finance L.P., DBS


To read the full report, click here to Download the PDF.

#1 Bet on more rate hikes by the Fed
#2 Looking for USDSGD to hit 1.40
#3 Long Indonesian equities
#4 Support for high grade credit, especially BBB
#5 Bullish 10Y China govvies
#6 Short AUD
#7 We like short-dated Chinese BBs for carry
#8 India govvies curve to steepen
#9 Short CNY
#10 Long S-REITS as a defensive play

Joanne Goh

Regional Equity Strategist
joannegohsc@dbs.com

The information herein is published by DBS Bank Ltd and PT Bank DBS Indonesia (collectively, the “DBS Group”). It is based on information obtained from sources believed to be reliable, but the Group 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. Any recommendation contained herein does not have regard to the specific investment objectives, financial situation & the particular needs of any specific addressee. The information herein is published for the information of addressees only & is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate legal or financial advice. The Group, 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 Group 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 Group & its associates, their directors, officers and/or employees may have positions or other interests in, & may effect transactions in securities mentioned herein & may also perform or seek to perform broking, investment banking & other banking or finan­cial services for these companies. The information herein is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation. Sources for all charts & tables are CEIC & Bloomberg unless otherwise specified.

DBS Bank Ltd., 12 Marina Blvd, Marina Bay Financial Center Tower 3, Singapore 018982. Tel: 65-6878-8888. Company Registration No. 196800306E.

PT Bank DBS Indonesia, DBS Bank Tower, 33rd floor, Ciputra World 1, Jalan Prof. Dr. Satrio Kav 3-5, Jakarta, 12940, Indonesia. Tel: 62-21-2988-4000. Company Registration No. 09.03.1.64.96422.