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und manager PT CIMB-Principal Asset Management (CPAM) expects to see better market conditions in the second half of 2016, having set sights on construction, telecommunications and selected consumer goods (FMCG) companies to spur growth on the local stock market this year.

CPAM director and chief investment officer Cholis Baidowi said that faster government spending, lower energy costs and especially the recent Bank Indonesia (BI) rate cut, had encouraged the fund manager to become '€œoverweight'€ in those sectors.

'€œThe BI'€™s policy is more accommodating,'€ he said over the weekend. '€œSectors that will benefit from the cut are banking, construction and eventually property.'€

Cholis said that his firm would remain upbeat about a market rebound as it was currently on a low base.

'€œWe hope a stronger recovery will occur in the second half and last until year-end,'€ he added.

The global stock market so far this year has seen volatility derived from China'€™s slowing economy and plunging oil prices, with emerging stocks touching a six-year low recently with US$2.5 trillion wiped off the value of equities in 2016, Bloomberg reported.

But now that the market'€™s over-expectation surrounding the newly-elected government last year had toned down, and with the global market'€™s recovery, a supportive macro economy and companies'€™ improving financial reports would support the index, Cholis added.

After losing 13.3 percent last year, CPAM projected the benchmark stock index, the Jakarta Composite Index (JCI), would gain 9.8 percent and move to around 5,400 this year.

CPAM, which is owned by CIMB-Principal Asset Management Berhad Malaysia, a joint venture company between Malaysia-based CIMB Group and US-based Principal Financial Group, also described as '€œslightly overweight'€ the banking, property, media, retail and automotive sectors.

It remains '€œneutral'€ toward shares in plantations, cement, toll roads and poultry companies and labels as '€œunderweight'€ stocks in coal, metals and oil and gas firms amid plunging global commodity prices.

BI reduced its key rate by 25 basis points (bps) to 7.25 percent earlier this month after keeping the rate steady for about a year. The central bank also lowered both deposit and lending facilities by 25 bps to 5.25 percent and 7.75 percent, respectively. Such moves are expected to spur demand for bank loans and stoke growth in Southeast Asia'€™s largest economy.

Cholis said that fuel prices, which had the potential to decrease further amid plunging global crude oil prices, would boost the public'€™s purchasing power and demand on FMCG.

State-owned oil and gas firm Pertamina announced earlier this month that the price of diesel would fall from Rp 6,700 (48 US cents) per liter to Rp 5,650 and the price of Premium-branded gasoline would be cut from Rp 7,400 per liter to Rp 7,050 across Java and Bali.

Meanwhile, CPAM president director Fajar R. Hidayat said that equity mutual funds would remain the focus of his firm this year.

'€œWe will cap our fixed income and money market allocation at a maximum of 40 percent [of total funds],'€ he said.

CPAM expects to see its assets under management (AUM) expand by 42 percent this year to Rp 7.5 trillion from Rp 5.32 trillion last year. The firm booked Rp 3.81 trillion in AUM in 2014.

Cholis projected that the returns of equity mutual funds would reach around 17 percent by the end of this year, higher than that of bonds, which was predicted to be at 13 percent.