Indonesia’s economy has fared well over the past decade. Real GDP grew at an average of 5% between 2014 and 2019, outpacing the broader ASEAN region. Per capita GDP has grown by a third and poverty rates have fallen, while inflation returned to the central bank’s target range in 2023.
Fiscal and external balances are in good shape. Budget deficits have stayed below 3% of GDP, except during the pandemic. Public debt levels are modest at under 40% of GDP. The current account deficit is less than 1% of GDP, and foreign reserves provide ample coverage of short-term debt.
Quick count indicates one-round election on 14 February and suggests Prabowo Subianto is leading. We believe the election overhang is over and expect continuity with the upcoming leader, which should be positive for the market.
The fourth quarter results were mixed, but our sector picks, particularly banks and telecommunications companies, fared better. We raised our forecasts and expect FY24F earnings for our universe to grow around 10%, versus 5% at the beginning of the year, led by the banks.
We have three investment themes for investors to consider: dividend plays, second half rate reversal, and post-election beneficiaries. With the potential for a rate reversal in the second half, property names and banks may benefit.
Below are some products to consider.
Equity Mutual Funds:
Equity Mutual Funds with offshore exposure:
Fixed Income Mutual Funds with dividend cash distribution features:
Government Bonds
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