6% upper end of JPMorgan’s estimate for Indonesia’s gross domestic product growth next year
Jakarta. New York-based brokerage JPMorgan Chase expects Indonesian stocks to outperform their peers in Asia next year, citing positive sentiment toward the government’s policy of supporting a stable currency and accelerating economic growth.
“A competitive rupiah, combined with optimism on the new president, should support investment,” the brokerage said in an e-mailed note on Wednesday.
The Jakarta Composite Index closed 0.5 percent higher to 5,127.93 on Wednesday, completing a two-day rally after a hike in the price of subsidized fuel. The benchmark index has gained 20 percent so far this year, the fourth-highest in Asia, after India, the Philippines and Thailand, according to data from the Indonesia Stock Exchange (IDX).
JPMorgan said that Indonesia’s coal mining, financial and durable goods companies were undervalued, as measured by their earnings per share. Telecommunication and health care firms on the other hand are expensive, JPMorgan said.
“Fuel subsidy reform could boost headline inflation, but we believe investors will support this positive policy move,” the JPMorgan note said.
On Tuesday, President Joko Widodo raised the price of subsidized fuel by an average of 33.6 percent in order to free Rp 120 trillion ($9.88 billion) for building ports, airports, railway and dams next year.
Bank Indonesia followed suit by increasing its benchmark rate to 7.75 percent later the same day to stem inflation expectations, while also loosening lenders’ liquidity requirements to boost loan expansion.
The central bank estimates Indonesia’s economy will expand between 5.2 percent and 5.8 percent next year, from an estimated 5.1 percent this year.
JPMorgan estimates growth of between 5 percent and 6 percent next year.
Still, the brokerage warned that the country may see pressure to finance its current account next year due to higher US rates or growth, zero rates in Europe and Japan, as well as a weak growth outlook in Europe and China.
Source: http://thejakartaglobe.beritasatu.com/business/indonesian-stocks-beat-peers-2015-jpmorgan/