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nfrastructure-related sectors will continue to be the star in next year'€™s stock trading all thanks to the government'€™s commitment to boost infrastructure developments that will also spur investors'€™ confidence on Indonesia'€™s overall economic outlook, analysts say.

The rise in infrastructure stocks would help lift the overall Jakarta Composite Index (JCI) '€” the main price barometer in the Indonesia Stock Exchange (IDX) '€” by almost 20 percent to 6,350 at the end of next year from an expected level of 5,350 by the end of this year, according to state-owned Mandiri Sekuritas'€™ analysis.

The JCI currently stands at about 5,140, up more than 20 percent so far this year, IDX data shows. Mandiri'€™s forecast compares with a prediction from Bahana Securities, also a state brokerage firm, that the index would hit 5,900 by the end of 2015.

'€œThe government'€™s decision to slash the fuel subsidy budget and channel the budget into infrastructure projects is helpful to relieving the country'€™s fiscal burden as well as pushing up economic growth,'€ Mandiri Sekuritas head of equity research John Rachmat said recently.

Infrastructure-related stocks, which also include property and financing, comprise lenders Bank Rakyat Indonesia (BBRI), Bank Tabungan Negara (BBTN) and Bank Central Asia (BBCA); state-run cement producer Semen Indonesia (SMGR); gas distributor Perusahaan Gas Negara (PGAS); state-owned construction firm Pembangunan Perumahan (PTPP) and property developer Ciputra Surya (CTRS) '€” which are among Mandiri Sekuritas'€™ top recommended shares for 2015.

The '€œproperty, real estate and building construction'€ sub-index under the JCI has become the top gainer in the stock exchange this year, with a year-to-date gain of 52 percent, followed by finance sub-index'€™s 34 percent advance and '€œinfrastructure, utilities and transportation'€ sub-index'€™s 23.5 percent increase.

The President Joko '€œJokowi'€ Widodo administration'€™s infrastructure push is not only illustrated by reallocating the fuel subsidy post in the state budget into more productive infrastructure spending, but also by targeting to build 35,000 megawatt power plants and fixed marine traffic that will see 24 new commercial ports being
developed.

While agreeing with Mandiri Sekuritas'€™ view on the continued rise of infrastructure-related stocks next year, University of Indonesia economic expert Lana Soelistia-ningsih said the impact from the government'€™s infrastructure push would be illustrated in the second half of the year.

'€œDefensive sectors such as consumer goods and banking will be among the top players in the stock exchange next year. The infrastructure-related sector will also stand out, but there should be more listed companies in the sector as there are only a few listed construction firms in the bourse with relatively expensive stocks,'€ Lana said.

Hence, the index might experience a slowdown in the first and second quarters as some of the government'€™s programs might require time-consuming deliberations at the House of Representatives before improving later on during the year, Lana said, predicting that the JCI would grow more modestly around 15 to 17 percent next year.

Indonesia'€™s not-so-strong predicted economic growth, as well as local companies'€™ exposure to US dollar debts or imported materials, were to be the main factor in restraining index movement in early next year, as listed companies would hold on expansion until there was improvement in Indonesia'€™s macroeconomic conditions.

The country'€™s economy, the biggest in the region, grows at its slowest pace in 5 years earlier in the third quarter this year at 5 percent against the backdrop of slowing economies worldwide including in Indonesia'€™s major trading partners that include Japan, China and European countries.

The rupiah, which according to Morgan Stanley is among the '€œfragile five'€ currencies most vulnerable to external shocks, has also seen increased volatility recently from broad-based US dollar strength on the back of an improving US economy.

But any move from the US central bank, the Federal Reserve, to possibly increase interest rates next year would only have a temporary impact on Indonesian stocks because the country'€™s fundamentals remain strong, said Rachmat of Mandiri Sekuritas.

'€œIf the JCI plunges due to any updates from the Fed, we have to remember that other indexes in the region also experience similar drops and we might be better performing than other countries,'€ he said.

The toning down of this year'€™s heated political climate during the 2014 election year is also expected to ease the government in executing its reform agendas. Some members of the opposing Red-and-White Coalition have toned down on their opposition against the government.

'€œAs the opposition is scaling down, there is a high probability that the House of Representatives will approve the revised state budget in February,'€ John went on explaining.