Investors Need To Prepare Adaptive Strategies Amid Global Uncertainty

Photo: Doc. Antara

JAKARTA - PT Manulife Aset Manajemen Indonesia (MAMI) assesses that investors need to prepare an adaptive strategy to follow global uncertainty that increases due to tariff wars, financial market volatility, and uncertain monetary policy.

In the midst of this external pressure, Indonesia's economic growth is in the main spotlight. Investment Specialist of MAMI Dimas Ardhinugraha assesses that the current government policy is trying to maintain a balance between supporting short-term growth through consumption and ensuring long-term economic sustainability through investment.

"Domestic consumption in weak conditions is reflected in the contribution of consumption to Indonesia's GDP before the pandemic was in the range of 55-58 percent, and is currently in the range of 54 percent. The uneven post-pandemic economic recovery is one of the causes of weakening consumption and threatens short-term economic growth," said Dimas in Jakarta, quoted by Antara, Wednesday, March 12.

The government has adopted various populist policies to support consumption, such as the Free Nutrition Food (MBG) program, increasing regional minimum wage (UMR), increasing the salaries of state civil servants (ASN), and canceling the increase in value added tax (VAT).

This policy is expected to provide a quick boost for the national economy considering that the proportion of consumption in Indonesian people's income is relatively high, reaching 74 percent.

However, in the midst of efforts to encourage consumption, Dimas assessed that investment remains a long-term priority to ensure sustainable economic growth.

The government targets investment growth of 8 percent in order to achieve the national economic growth target of 8 percent.

One of the strategic steps taken is the formation of Danantara, which is allegedly able to optimize the management of state assets even though there is still uncertainty regarding transparency in its management.

Then, in the financial market sector, global uncertainty sparked pressure on the Indonesian stock market which experienced a sharp decline, while the bond market continued to show resilience.

Dimas views that the stability of the exchange rate and easing liquidity as a key factor in restoring investor confidence.

"Historically, the stock market tends to record positive performance when the rupiah exchange rate is stable or strengthens, and liquidity conditions relax," he said.

However, the bond market shows increased attractiveness for foreign investors, especially because of Bank Indonesia's (BI) policy which still opens up space for flower rate cuts.

Dimas explained that the reduction in the yield of the Bank Indonesia Rupiah Certificate (SRBI) was a factor that prompted investors to look back at Government Securities (SBN) as investment instruments.

"However, it is undeniable, the risk remains influenced by the high global market dynamics and the market perception of domestic policy is a factor that can affect market sentiment. To address this condition, in our opinion investors must have a diversified investment portfolio to minimize the level of risk, but can still stay invested in the market to capture potential reversals in the market," he said.

On the external side, the tariff policy announced by the United States (US) adds to the challenges for the global economy.

The imposition of 25 percent tariff on Indonesian steel to the US is considered to have a limited direct impact, considering that steel exports only cover 0.07 percent of Indonesia's total exports.

However, the indirect risk of a global trade slowdown remains a major concern.

"Currently, we conclude, the risk of tariffs is still minimal, and what we have to deal with more is the indirect risk that arises from the potential decline in global trade and export demand from Indonesia, as well as the increase in the price of imported goods in general," he said.

Furthermore, Dimas highlighted the direction of monetary policy of the Fed and BI, which are still cautious in lowering interest rates.

The Fed is expected to cut interest rates by 50 basis points this year, while BI maintains a balance between exchange rate stability and economic growth.

"The MAMI projection for the BI Rate until the end of the year is in the range of 5.25-5.50 percent," he said.