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Indonesia a ‘natural winner’: Nomura
Indonesia’s stock market has performed relatively well amid recent market volatility, but research analysts at financial services group Nomura Holdings suggest it is still punching below its weight.
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Blue sky is seen above the usually polluted Jakarta skyline on July 2, 2021, after several days of residents restricting themselves from leaving their homes for fear of contracting COVID-19. (AFP/BAY ISMOYO)
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ndonesia’s stock market has performed relatively well amid recent market volatility, but research analysts at financial services group Nomura Holdings suggests it is still punching below its weight.
While acknowledging that “potential stagflation and geopolitical tensions, along with tapering and likely ensuing interest rate hikes in Indonesia, can be a toxic concoction of risks,” a research report published on Sunday implies Southeast Asia’s largest economy has a leg-up on its regional peers.
“Although we view the economic environment as hardly enthusiastic to look forward to in the next year, we think Indonesia provides a relative shelter amidst the challenging mid-to-long term market outlook,” the equity strategists contend, pointing to Indonesia’s speedy recovery from the coronavirus-induced economic crisis.
“Indonesia's [macroeconomic conditions] have improved, recording one of the fastest recoveries in trade (exports and imports), partly due to higher commodity prices, and noteworthy structural reforms in downstream. Despite the ongoing rally, we think the recovery remains underappreciated as [the IDX Composite index] is still a laggard in global and regional markets,” reads Nomura’s latest Indonesia Equity Strategy report.
Read also: IDX green island in sea of red as global stock markets drop
Sky-high prices of natural gas have led to substantial increases in the price of other energy sources as well, causing concerns about inflation – and headaches for central banks – around the globe. Thanks to abundant domestic resources, however, Indonesia is less affected than many other countries, and even benefits to some extent from high commodity prices.
“Indonesia is among the few nations with [an] energy surplus, especially in the current energy crunch environment. […] We expect coal and CPO [crude palm oil] prices should remain elevated amidst the energy crunch.” the researchers note.
