Morning rush hour in Jakarta. Indonesia’s Jakarta Composite Index has faced some volatility on its way into 2022, but as of late Friday, it was the best performing major Asia-Pacific index of the year.
Ismoyo Bay | AFP | beautiful pictures
Indonesia’s Jakarta Composite Index may have faced some difficulties along the way into 2022, but as of late Monday, it was the best performing major Asia-Pacific index of the year.
The index is up 6.51% since the start of the year.
In contrast, Hong Kong’s Hang Seng, South Korea’s Kospi and Taiwan’s Taiex have fallen more than 25% this year.
Mainland China’s Shanghai Composite and Shenzhen components were also affected, down nearly 17% and 27% respectively.
Japan’s Nikkei 225, India’s Nifty 50 and Thailand’s SET index outperformed – posting single-digit losses.
Singapore’s Straits Times Index is the second best performing index in the region, down just 0.53%.
Indonesia’s advantage
The Jakarta Composite Index fell sharply in May and July before catching up and remaining above 7,000 since early August.
According to Maynard Arif, head of Indonesia equities at DBS Group Research, foreign investment in equities has driven the index higher and Indonesia is benefiting from higher commodity prices. The Southeast Asian country is a commodity exporter.
The economic recovery has been on an uptrend after Covid restrictions were lifted, although advanced economies experienced this push earlier, he added.
“Earnings growth in 2022 over [the] The Indonesian market remains strong, even after a major recovery in 2021 from a low base,” Maynard told CNBC in an email.
Valuations can be expensive [compared with] other countries but this can be proven based on the outlook and growth rate of Indonesia.
Maynard Arif
Head of Indonesia Securities, DBS Group Research
He added that DBS remains upbeat on Indonesia, although it faces difficulties from interest rate hikes from the US Federal Reserve and a strong dollar – which has led to an outflow for bonds. government this year.
“Pricing can be expensive [compared with] other countries but that can be justified based on the outlook and growth rate of Indonesia,” he said.
However, falling commodity prices are a source of instability for Indonesia, said Manishi Raychaudhuri, head of Asia-Pacific equity research at BNP Paribas.
He wrote in a September 28 report: “Given the decline in energy prices… we advise you to be cautious and take an agile approach to the energy sector in particular and Indonesia in general.
Elsewhere in Southeast Asia, Singapore has a “large representation” of companies – such as banks – benefiting from rising yields, Raychaudhuri said, adding that the country and India India, Indonesia and Malaysia are “safe places”.
Suresh Tantia, senior investment strategist at Credit Suisse, said tourist capital inflows are supporting the economy and markets after reopening.
South Asia vs North Asia
Tantia also said Credit Suisse currently prefers South Asia to North Asia, given the export-dependent nature of markets such as South Korea, Taiwan and China.
“Korea and Taiwan, for sure, we could have some more pressure, export growth slows, currency remains weak and demand for the chip sector also weakens, which is why,” he told CNBC. very important for these two markets.”
Timothy Moe, Asia Pacific equity strategist at Goldman Sachs, said there are three positive drivers for Southeast Asian markets.
These include their delayed recovery from Covid, the emergence of a digital or “new” economy and rising interest rates.
“ASEAN markets generally have very high exposure to banks, and banks are not where they have been in the last 10 years,” he told CNBC.Asian street signs“on Tuesday.” But now, with the interest rate cycle changing, and so it’s a huge headwind for ASEAN markets. “
Taiwan is heavily exposed to a slowing global economy and also experiences increased geopolitical tensions with China.
Meanwhile, foreign ownership of South Korean stocks is at a decade low, he added. But that could mean the country is a good candidate to invest in North Asia, Moe added.
He pointed out that South Korea does not have significant geopolitical concerns like neighboring economies and that its currency has sold off this year.
