OUR GRAND THEME
The Ascendant Resurgence: Catalyzing Market Prestige Across Horizon Shifts
01
The global economic landscape is facing multiple challenges. While the US Federal Reserve signals potential rate cuts later in 2024 due to an inflation slowdown, the upcoming US presidential election injects market uncertainty. Historically, pre-election periods in the US affect the global economy, and with distinct policies between the candidates, market sensitivity is heightened. Ongoing global tensions add complexity, as conflicts create disruptions for commodities in the energy and food sectors, leading to increased production costs and slower economic growth.
03
Indonesia’s equity market has exhibited significant indecisiveness, as evidenced by the Jakarta Composite Index (JCI) yielding a modest 6.03% return year-to-date through June 2024, while blue-chip indices such as LQ45 posted slight losses. This volatility was exacerbated by substantial foreign investor outflows due to a weakened rupiah and the Federal Reserve's prolonged hawkish stance. Despite these challenges, the JCI’s price-to-earnings (PE) ratio of 13.4x remains attractive. Considering future prospects, positive sentiment driven by potential rate cuts from the Federal Reserve and stable economic projections may restore the market back to its glory days.
02
Despite global headwinds, Indonesia remains a bright spot with its newly formed government emphasizing sustainable development, which brings stable economic projection on the table. The free lunch program initiated by the newly formed government aims to improve student nutrition, ultimately enhancing educational outcomes, and potentially boost the consumer sector. However, this program consumes a substantial portion of the state budget, potentially pushing the overall budget deficit to 2.7% of GDP. Thus, raising questions about investor confidence and brings volatility towards the market.
04
The trajectory of Indonesia's economy is contingent upon a complex interplay of challenges and opportunities. A pivotal policy initiative, the government's nutrition-focused free lunch program, could potentially reshape domestic consumption patterns, particularly in the dairy and poultry sectors. However, the budget allocated for this program raises concerns about fiscal sustainability and investor confidence. Additionally, raw commodity exports have surpassed Rp84.5 trillion and the sector stands to gain from rising prices fueled by China’s ample stimulus that potentially drives metal based commodities prices. These interconnected sectors underscore Indonesia's economic trajectory and are essential for national prosperity.
05
Given the global economic landscape shifts and Indonesia confronts unique challenges to restore market confidence, Pivotal questions arise. How can the global community foster economic growth in the face of increasing interconnectedness and volatility? Can Indonesia’s newly formed government foster sustainable development and innovative policies amidst the rapidly evolving global landscape? What attempt can be done by Indonesia’s market to regain its former prominence as a preeminent destination by foreign capital investment? Furthermore, how could the nation’s policies and sectoral developments be the key to driving its economic prosperity? Eventually, how will Indonesia balance global economic headwinds and domestic ambitions to regain its former market prominence?
06
These revolving questions unveiled our theme: exploring Indonesia’s journey to reclaim its market prominence amidst a rapidly shifting global landscape and the intricate balance of domestic and international challenges.