Bumpy Road (Global Equity Market)
In August 2023 the US equity market experienced turbulence where the correction happened in the middle of the month because of the anticipation of a strong labour market that could be followed by the Fed’s next move to hike the benchmark rate. The US inflation keeps declining from month to month, but unemployment data has not flagged any downturn. Additionally, in the Jackson Hole annual symposium, the Fed’s Governor still emphasized a hawkish statement. The market read the message as a consistency in the monetary policy, hence it did not create any uncertainty. The latest data on PCE inflation (June 2023) was measured as low as expected and the unemployment rate (August 2023) has cooled off. Thus, the chance of further rate hike in September and November become lower.
On the side, global markets get sceptical about China’s economic recovery and require the government or central bank to deliver more stimulus. However, the stimulus policy will not be conducted rapidly but rather more gradually. Nevertheless, we see there was an improvement in China PMI Manufacturing and ongoing coal shipment activity which indicates the economy is progressing.
We see the S&P 500 and Nasdaq index have recovered quickly as the economic numbers cooled. Markets need more ongoing data but we suggest investors take a position by entering the global portfolio. Additionally, approaching year-end is a good time for anticipating full-year 2023 achievement and a better expectation in 2024.
Better Option (Domestic Equity Market)
The government has set the draft of the national budget 2024 that emphasizes consumption spending. The budget is designed to reach GDP growth at 5.2% with inflation around 2.8%. The 2024 budget deficit is set at 2.3% of GDP same as the current year’s revised deficit of 2.3%. Government expenditure is projected to rise by 5.8% yoy to Rp 3,304 trillion and revenue is expected to grow 5.5% yoy to Rp2,781 trillion. As the global growth cycle is still heading for a slowing down momentum, Indonesia can be the best choice for investors.
JCI rose to almost 7,000 as the US PCE inflation stayed low and the labour market cooled. Indonesia has several positive catalysts such as the stock market being at an attractive valuation, commodity prices being held well in August, relatively lower el-nino impact thus inflation being manageable, and lastly, election spending likely being impactful to the economy. We also cannot rule out if the Chinese economy can make a comeback rapidly and the possibility that the US economy can shift to a goldilocks condition in 2024 which can bring better returns to equity market performance. As we approach year-end, the market will be more optimistic and a well-positioned asset allocation can benefit investors in the coming months.
|MGSED||MGSED invests in Sharia-compliant Equities Abroad listed in the Sharia Securities List. Categorized as a Long-Term investment with high risk. Investors bear the risk associated with the equity portfolio..|
|MITRA||MITRA invests in majority domestic stocks, with a focus on Big Cap stocks. Categorized as a Long-Term investment with high risk. Investors bear the risk associated with the equity portfolio.|
|MICB||MICB primarily invests in stocks included in the LQ45 index. Categorized as a Long-Term investment with high risk. Investors bear the risk associated with the equity portfolio.|
|MANFIGA||MANFIGA primarily invests in stocks included in the FTSE Indonesia ESG Index. Categorized as a Long-Term investment with high risk. Investors bear the risk associated with the equity portfolio.|
|XMLF||Mandiri ETF LQ45 is an ETF that invests in blue-chip stocks listed in the LQ45 Index. Categorized as a Long-Term investment with high risk. Investors bear the risk associated with the portfolio of these stocks.|
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The opinions expressed in the article are for general informational purposes only and are not intended to provide specific advice or recommendations for individuals or specific mutual fund or investment products. It is intended solely to provide education about the financial industry. Views reflected in the content may change at any time without notice. All performance data and investment returns mentioned in this article cannot be used as a basis for calculation to buy or sell a mutual fund. This data is performance records based on historical data and is not a guarantee of future mutual fund performance. Investment through mutual funds carries risks. Investors are required to read and understand the prospectus before deciding to invest through mutual funds.