The benchmark Jakarta Composite Index (JCI) could reach 5,450 points by the end of the year, according to the subsidiary of state-owned Bank Mandiri. Despite being higher than the current level of about 4,900, the projected level is still lower than last year’s close of 6,299.

The JCI, the main gauge of the Indonesia Stock Exchange (IDX), has lost almost 22 percent of its value so far this year as a result of the pandemic, which has caused heavy volatility in the domestic and global stock market. The JCI had fallen 0.64 percent to 4,913 as of 10:07 a.m. Jakarta time on Monday after jumping 0.8 percent earlier in the day.

“If vaccines could be available sooner then of course this would be a positive sentiment going forward and market expectations would further recover next year,” Mandiri Sekuritas deputy head of equity research Tjandra Lienandjaja told reporters during a press briefing on Thursday.

Indonesia’s second-quarter gross domestic product (GDP) contracted 5.32 percent year-on-year (yoy), bringing the country to the brink of its first recession since 1998. The third-quarter economy is expected to shrink as well, albeit to a smaller extent.

Finance Minister Sri Mulyani Indrawati said the government had revised its gross domestic product (GDP) outlook down to an annual contraction of between 0.6 percent and 1.7 percent as the uncertainty surrounding the pandemic had taken a significant toll on consumption and business investment.

This means Indonesia will log an annual economic contraction for the first time since the 1998 Asian financial crisis. The country’s economy shrank by 13.13 percent in 1998 before rebounding to 0.79 percent growth the next year.

“The JCI gains from the current level will be supported by domestic investors,” Tjandra said.

IDX data shows that the contribution of foreign investors to the bourse’s total trading value has dropped to 35 percent – versus the 44 percent that prevailed last year. As of Sept. 25, foreign investors had dumped Rp 42.17 trillion (US$2.83 billion) in stocks on net.

Tjandra said stocks in some sectors, including health care, consumer staples, telecommunications and communication towers, would thrive this year. Investors would avoid the automotive and banking sectors, he added.

Separately, Sucor Sekuritas head of research Adrianus Bias said in a discussion with The Jakarta Post on Aug. 4 that he recommended that investors take different approaches in the third and fourth quarters as most companies' second quarter earnings were below expectations.

“In the third quarter, we will stick to defensive names, those with resilient earnings profiles and huge dividends that make their valuation quite premium in comparison to the others,” he said.

Adrianus said consumer goods, telecommunications and tower players were preferred for their earnings feasibility, as well as nickel and gold commodity stocks.

“Going into the fourth quarter, the story will be reversed. Those who suffered in the second or third quarter, whose performance was bad, should create a low base for a rebound,” he added.

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