Faster Elections Completed, Indonesia's Investment Climate Will Be Positive

JAKARTA - PT Mirae Asset Sekuritas Indonesia predicts that the investment climate and capital market will be positive after a general election (election) that has the potential to be completed faster than predicted, which invalidates uncertainty and concerns regarding the protracted state head election process.

Chief Economist Mirae Asset Rully Arya Wisnubroto said the presidential election, which is predicted to take place in one round, will provide confidence for industry and business players to make more expansive decisions.

"Positive predictions in the investment climate are accompanied by the prediction factor for the cut of the BI rate in the second semester of 2024," Rully said in Media Day: February 2024, Tuesday, February 20, 2024.

Rully added that currently, the election, which was only held on February 14, 2024, has shown a signal that the presidential candidate is above the line that other presidential candidates cannot follow as well as have the potential to abort the potential for a two-round presidential election (pilpres).

"The prediction is based on the quick calculation of several survey institutions and the final results will be announced next month," he explained.

Nevertheless, Rully said that the macroeconomic factor of the external economy has more effect on the domestic macroeconomics than the election factor on the domestic macroeconomics.

Rully said another factor that would affect Indonesia's macroeconomic conditions was the development of inflation in developed economies that determine the direction of interest rates, stable domestic inflation, as well as a more controlled foreign balance and fiscal balance sheet.

According to Rully, another factor that underlies this optimism is based on the prediction of government spending which is more focused on maintaining macroeconomic stability.

Rully also noted that there are several risks that can also affect Indonesia's economic conditions. Some of these factors are geopolitical conditions that are still full of uncertainty.

The risk factor is the potential decline in commodity prices due to predictions of the economic slowdown in China and global levels, US inflation that could be higher than expectations, as well as continued economic uncertainty due to elections.

In the future, Rully conveyed that another political momentum that the public is waiting for is when the cabinet is formed which will appoint ministers and other state officials.

Head of Research Team Mirae Asset Robertus Hardy, added that historically amid the potential reduction in domestic benchmark interest rates, several sectors, namely consumer goods (cyclical and non-cyclical), and finance, will perform higher than the Composite Stock Price Index (IHSG).

"We believe the situation when Bank Indonesia has the potential to loosen its monetary policy as it is today, is similar to the post-the 2008 global financial crisis and the Covid-19 pandemic in 2020", he said

Among the two periods, the three above were able to record consistent and significant positive performance. From the non-cyclical consumption goods sector, some of the stocks include UNVR, ICBP, MYOR, AMRT, from the cyclic consumption sector there are ACES and MAPI, as well as from the financial sector there are BBRI, BBCA, BMRI, and BBNI.

With these sectors in mind and taking solid operational and financial performance into account, Robert said the stockpick option was still on BBCA, BBRI, HOKI, AMRT, ACES, MAPI, TLKM, ISAT, and ASII.

Hardy conveyed that the JCI's fair value prediction is also still set at 8,100 for 2024 which reflects the valuation of the 14x P/E ratio with a prediction of profit growth per share (EPS) of 5 percent - 6 percent.