Catch Up (Domestic Equity Market)

The Jakarta Composite Index has ended the year 2023 with a positive return of 6.2% yoy. The ride of the stock market throughout 2023 was quite bumpy and slightly below our expectation. We think this is due to many noises and worries the whole year through especially from the global economy. At the end of 2022, most economists expected the US Federal Reserve would be spending 2023 facing a recession while fighting against the biggest wave of inflation for a generation. Instead, the US has achieved the strongest growth of any large economy, unemployment is close to record lows, and price pressures are showing signs of creeping back to the central bank’s target of 2 per cent. At the most recent rate–setting meeting, the Fed released its latest data showing that officials expect the central bank to cuts its benchmark federal funds rate by 75 basis points over the coming 12 months from currently at a 22-year high of between 5.25% and 5.5%. Baked into the forecasts from the Federal Open Market Committee is a belief that the US economy will achieve its soft landing, with inflation returning to the Fed’s goal, growth slowing only mildly and unemployment still reasonably low.

Global investors have less incentive to take more risk in investing in our domestic market and prefer to stay in money market that can provide high returns due to the high benchmark rate. The domestic stock market could perform better if foreign investors invested more in the Indonesian equity market because the Indonesian economic condition was one of the most robust in the world. The strong economic condition can continue until 2024 because of the election activities, companies’ capex spending and global easing monetary policy. We see some sectors like banking, retail, and consumer should be well supported amidst the political campaign period. Meanwhile, the possibility of rate cut should also help interest rate-sensitive sectors such as banks and property later in the second half.