Restrain Consumption (Domestic Equity Market)

After a deep correction in October 2023, global investors are cheering for better market conditions in November 2023. Major central banks halted the interest rate hike and, in general, the global economic condition is moving into the anticipated situation. Central bankers have repeatedly said the last mile, which involves taming growth in domestic goods and service prices, will be harder. However, core price inflation has recently turned a corner. Signs are increasing of dimming in economic activity in the US, Europe and the UK. That would build the case to begin cutting rates sooner than anticipated. However, it is too early to declare mission accomplished. Policymakers need to watch core inflation closely on how medium-term dynamics such as demographic change, the AI revolution and geopolitical shifts may also influence prices.

The domestic economy is still trying to hold on despite the declining consumer confidence index. If we look at the income index, consumption allocation increased in September 2023 but normalized in October 2023. The mid-up consumers are pending consumption which may relate to increasing macro uncertainty. Hence, we think the increasing consumption is at the expense of declining saving composition. In that case, we hope the government will expedite social spending approaching the end of the year. Having said that we still believe global funds will flow in more to Indonesian equities due to improving fundamental reasons. As the global economies slow down, diversifying into broader markets like Indonesia will be one of the options.