Fixed Income and Currency Strategist

Gautam Jain, PhD, CFA

FX & Rates

<ul>
<li>The Indonesian rupiah has outperformed most EM currencies, particularly other Asian currencies, and has done so with low volatility in contrast with the rising volatility of the EM FX index.</li>
<li>Looking ahead, headwinds may be appearing with the interest-rate differential working against the currency as the Fed starts raising rates and higher inflation leading to lower real rates.</li>
<li>While the rise in commodity prices is generating trade surpluses for now, the current account may turn negative from positive with a rise in imports accompanying the economy's reopening.</li>
</ul>


The Indonesian rupiah has outperformed most EM currencies, particularly other Asian currencies, and has done so with low volatility in contrast with the rising volatility of the EM FX index.
Looking ahead, headwinds may be appearing with the interest-rate differential working against the currency as the Fed starts raising rates and higher inflation leading to lower real rates.
While the rise in commodity prices is generating trade surpluses for now, the current account may turn negative from positive with a rise in imports accompanying the economy's reopening.


Indonesian Rupiah Shines in Volatile Times

External broker reports(aggregated public sources), BRI Danareksa Research

BRI Danareksa Research

External broker reports(aggregated public sources)

As a one-stop financial solution with the vision to be the most valuable securities house, BRI Danareksa Sekuritas (BRIDS) has maintained an excellent track record and extensive experience in the capital market as an underwriter, broker, and financial advisor for individual, institutional, foreign and domestic, private and government clients. Established in 1992, PT Danareksa Sekuritas is a securities company that performs activities as a securities broker, underwriter, or arranger and financial advisor.

Macroeconomics

<ul><li>As domestically focused sectors underperformed, we cut our FY24/25 EPS growth est. to 2.4%/9.3% and JCI FY24-end target to 7,448.</li><li>Despite still muted growth indicators, we expect seasonal tailwinds to benefit certain sectors (e.g., Retail, Consumer) in 4Q24. </li><li>At a forward P/E of 11.9x, JCI valuation is attractive (160bps spread vs. 10-yr yield); amid macro risks, we favor quality stocks and USD hedge.</li></ul><p><em>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</em></p>

As domestically focused sectors underperformed, we cut our FY24/25 EPS growth est. to 2.4%/9.3% and JCI FY24-end target to 7,448.Despite still muted growth indicators, we expect seasonal tailwinds to benefit certain sectors (e.g., Retail, Consumer) in 4Q24. At a forward P/E of 11.9x, JCI valuation is attractive (160bps spread vs. 10-yr yield); amid macro risks, we favor quality stocks and USD hedge.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Equity Strategy: Attractive Valuation Emerging, Prefer Quality Stocks and USD Hedge...

Chief Economist & Political Strategist, CrossASEAN Research

Prasenjit K. Basu

Chief Economist & Political Strategist

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

<ul>
<li>Although the fiscal deficit declined to 1.6% of GDP in 2023, markets are pricing in risks arising from President-elect Prabowo's possible resort to fiscal profligacy in pursuit of 8% growth. </li>
<li>More tangibly, with exports declining 7.5%YoY and imports up 1.1%YoY in Q1CY24, the trade surplus shrank to US$7.3bn (from Q1CY23's US$12.11bn), likely widening the CAD (from Q4CY23's 0.4% of GDP).   </li>
<li>With IDR depreciating 9.3%YoY, BI hiked its policy rate by 25bp last week to pre-empt imported inflation. Another rate hike is likely before Oct'24, so we would Underweight Indonesia. </li>
</ul>


Although the fiscal deficit declined to 1.6% of GDP in 2023, markets are pricing in risks arising from President-elect Prabowo's possible resort to fiscal profligacy in pursuit of 8% growth. 
More tangibly, with exports declining 7.5%YoY and imports up 1.1%YoY in Q1CY24, the trade surplus shrank to US$7.3bn (from Q1CY23's US$12.11bn), likely widening the CAD (from Q4CY23's 0.4% of GDP).   
With IDR depreciating 9.3%YoY, BI hiked its policy rate by 25bp last week to pre-empt imported inflation. Another rate hike is likely before Oct'24, so we would Underweight Indonesia. 


Indonesia: Prabowo Risk Beginning to Hurt IDR, Requiring Tighter Money

Cross Asset Strategy

<ul>
<li>Prabowo, a controversial ex-general accused of human rights abuses in Jakarta and East Timor during Suharto's era, looks likely to win the presidential election, with Jokowi's son Gibran as running-mate. </li>
<li>Gibran's presence has shifted the parliamentary polls by 10pp in favour of Prabowo's party, Gerindra, likely making it the largest at the expense of PDI-P-- winner of all previous elections.</li>
<li>Post-Oct'24, policy is likely to become more mercurial, fiscally imprudent, growth- and inflation-oriented. Markets are likely to be turbulent after initial celebration of a decisive outcome. We urge caution. </li>
</ul>


Prabowo, a controversial ex-general accused of human rights abuses in Jakarta and East Timor during Suharto's era, looks likely to win the presidential election, with Jokowi's son Gibran as running-mate. 
Gibran's presence has shifted the parliamentary polls by 10pp in favour of Prabowo's party, Gerindra, likely making it the largest at the expense of PDI-P-- winner of all previous elections.
Post-Oct'24, policy is likely to become more mercurial, fiscally imprudent, growth- and inflation-oriented. Markets are likely to be turbulent after initial celebration of a decisive outcome. We urge caution. 


Elections Likely to Hand a Decisive Mandate to Strongman Prabowo

<ul>
<li>With a positive real policy rate of +2.23% and 3.5% appreciation of IDR ytd, BI was comfortably able to keep its policy rate unchanged despite this week's US rate hike.  </li>
<li>Despite the commodity price correction, Indonesia will likely post a 2023 current account surplus of 0.2% of GDP; its fiscal deficit was 1.6% of GDP in the latest 12 months. </li>
<li>The equity market is trading at a trailing P/E of 14.7x, marginally below its 30-year mean. With RGDP of 5% in 2023 and 5.5% in 2024, we recommend being Overweight. </li>
</ul>


With a positive real policy rate of +2.23% and 3.5% appreciation of IDR ytd, BI was comfortably able to keep its policy rate unchanged despite this week's US rate hike.  
Despite the commodity price correction, Indonesia will likely post a 2023 current account surplus of 0.2% of GDP; its fiscal deficit was 1.6% of GDP in the latest 12 months. 
The equity market is trading at a trailing P/E of 14.7x, marginally below its 30-year mean. With RGDP of 5% in 2023 and 5.5% in 2024, we recommend being Overweight. 


Indonesia: Attractively Valued Amid Good Growth with Low Inflation and CA Surplus

Indonesia

The Indonesian rupiah is the official currency of the Republic of Indonesia. 

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Indonesian Rupiah Shines in Volatile Times

The Indonesian rupiah has outperformed most other EM currencies but headwinds may be appearing for the currency as the Fed starts raising rates and...

Gautam Jain, PhD, CFA

Equity Strategy: Attractive Valuation Emerging, Prefer Quality Stocks and USD Hedge...

At a forward P/E of 11.9x, JCI valuation is attractive (160bps spread vs. 10-yr yield); amid macro risks, we favor quality stocks and USD hedge.

BRI Danareksa Research

Indonesia: Prabowo Risk Beginning to Hurt IDR, Requiring Tighter Money

Despite a smaller fiscal deficit (1.6% of GDP) in 2023, markets are pricing in "Prabowo risk". The switch to a current account deficit will...

Prasenjit K. Basu

Elections Likely to Hand a Decisive Mandate to Strongman Prabowo

Controversial ex-general Prabowo is poised to win the presidential election with Jokowi's son as his running-mate, potentially leading to unstable...

Prasenjit K. Basu

Indonesia: Attractively Valued Amid Good Growth with Low Inflation and CA Surplus

With a real policy rate of +2.23% & 3.5% IDR appreciation ytd, BI saw no need to match the US rate hike. Solid 5%+ RGDP growth with a CA surplus...

Prasenjit K. Basu

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Indonesian Rupiah Shines in Volatile Times

The Indonesian rupiah has outperformed most other EM currencies but headwinds may be appearing for the currency as the Fed starts raising rates and...

Gautam Jain, PhD, CFA

Equity Strategy: Attractive Valuation Emerging, Prefer Quality Stocks and USD Hedge...

At a forward P/E of 11.9x, JCI valuation is attractive (160bps spread vs. 10-yr yield); amid macro risks, we favor quality stocks and USD hedge.

BRI Danareksa Research

Indonesia: Prabowo Risk Beginning to Hurt IDR, Requiring Tighter Money

Despite a smaller fiscal deficit (1.6% of GDP) in 2023, markets are pricing in "Prabowo risk". The switch to a current account deficit will...

Prasenjit K. Basu

Elections Likely to Hand a Decisive Mandate to Strongman Prabowo

​Controversial ex-general Prabowo is poised to win the presidential election with Jokowi's son as his running-mate, potentially leading to unstable...

Prasenjit K. Basu

Indonesia: Attractively Valued Amid Good Growth with Low Inflation and CA Surplus

With a real policy rate of +2.23% & 3.5% IDR appreciation ytd, BI saw no need to match the US rate hike. Solid 5%+ RGDP growth with a CA surplus...

Prasenjit K. Basu

Controversial ex-general Prabowo is poised to win the presidential election with Jokowi's son as his running-mate, potentially leading to unstable...