Market Buzz : #StayAtHome Investing - 1 April 2020
By Willy Gunawan - Direct Institutional Sales
How is the current market situation?
The virus has taken a big hit on the consumption behaviour across the nation. Jakarta as the epicentre of economy and the most infected cases has started to impose a stricter rule to curb the social life of the population. It will also affect the other cities like Bandung, Semarang and Surabaya. Basically, Java leads the largest economy in Indonesia with 59% of country’s GDP.
This current situation affects the other economy activity like banking system, infrastructure, manufacture, tourism, transportation, etc. This is due to effort to curb the increasing virus spread. When the number cured patients is higher by far than the dead number, we can be more loosen up and expect the situation under control.
What has been done by the Government?
In this current situation Government has reacted fast to keep economy wheels rolling. We can see more or less can be categorized into three active fiscal policy
- The Government will spend more on healthcare system like centralize the infected peoples, buying more ventilators, hygiene equipment, medicine. On the other hands, Government supports hospitals, doctors, nurses and volunteers.
- The Government will inject substantial number of liquidity for the poor and informal worker. There are 29.3 million people fall into poor category and deserve for direct cash and food distribution. Whereas, for informal worker like food stall (warung) owners, online drivers, employees in the market will be covered through social safety net program where each of them will receive Rp 1 million for the next four months.
- Government instructs the relaxation in restructuring loan and taxation for companies where it can help companies to retrench their workers. This can assist these companies to keep the payroll instead.
Some incentives that can be considered further for the next step are
- Fostering people to join BPJS Kesehatan with cut fee for several months.
- Extending and expanding the free food coverage.
- No charge for electricity fee at 450 VA and 900 VA category.
- Increase the non – taxable income
- Tax free for middle and small enterprises for months.
What is right the instrument to invest now?
We think still believe the high yield Government Bond especially in USD is still important to have right now. Because Indonesia still ranks among the highest coupon in emerging market. We suggest to choose the low duration bonds because that will lower the risk while reap the current jumping short term yield curve.
Second is the money market instrument; we like it because currently banks are raising liquidity due to lower economy activity that causing low money circulation. Therefore, banks are willing to provide slightly higher rate than previously. This instrument has the lowest risk and modest profit in this current event.
What investor can do?
“Wide diversification is only required when investors do not understand what they are doing” – Warren Buffet.
When we don’t have enough information to act while market is moving out of control, Diversification Theory become relevant again where we do not concentrate our investment in at one asset/instrument (all eggs in one basket). If we haven’t seen the light at the end of the tunnel, we can consider an instrument like diversified global equity using USD or Emerging Market Government Bond in USD.
Does Mandiri Investasi have the recommended products?
We have three instrument that investors can choose:
- Emerging Market Government Bond in USD : MINION Fund and IDAMAN Fund
- Diversified global equity : MGSED Fund and ASEAN5 Fund
- Money market : MIPU Fund and MIPU2 Fund
Is it a buying opportunity? When start to buy?
Surely we won’t jump in all out to catch the falling knives. We can now purchase 25% from what we plan to invest and slowly average in there.