As of Wednesday, the Jakarta Composite Index (JCI), the main gauge of the Indonesia Stock Exchange (IDX), had surged 4.71 percent to 6,428.59 since the beginning of January, and jumped 8 percent from Jan. 13 last year.

After a challenging and highly volatile 2020 due to the pandemic, Mirae Asset Sekuritas analyst Hariyanto Wijaya said on Dec. 12 that he expected the JCI to fare better this year on the back of earnings growth recovery and preference for emerging market equities asset classes, including stocks and bonds, amid the weakening United States dollar.

“The US dollar is likely to continue weakening in 2021 due to the US’ current account and fiscal deficits,” he wrote in a research note, adding that the low-interest rate trend should also put pressure on the currency.

As of Tuesday, the rupiah had strengthened 0.34 percent to Rp 14,082 against the greenback. It has also largely recovered from the peak point on March 3 last year at around Rp 16,500.

The stock market hit record lows last year, crashed to 3,937 in March, haunted by the impacts of the COVID-19 pandemic as investors dumped risky assets. The JCI gained a modest 1.7 percent in 2019 to close the year at 6,299 on the backdrop of sluggish economic growth.

A weakening dollar would create a positive impact for emerging markets, especially Indonesia as the IDX main gauge tends to book a positive performance during such conditions, he added.

Hariyanto also believed that Indonesia should see a huge upside potential this year as foreign funds showed signs of returning back into the country’s equity since last November after nine consecutive months of continuous foreign net sell in 2020.

Read also: [YEARENDER] Stock market rebounds from pandemic

Coupled with the encouraging COVID-19 vaccine development in Indonesia, Hariyanto projected the JCI to conclude its trade this year at 6,880.

The government kicked off the mass vaccination on Wednesday as President Joko "Jokowi" Widodo received the country's first COVID-19 jab. It aims to vaccinate more than 181 million people within 15 months.

However, Hariyanto stated that investors should remain wary of the country’s economic development due to the unchanged minimum wage in most provinces this year.

Artha Sekuritas vice president of research Frederik Rasali also warned investors to remain vigilant of the latest vaccine development.

“We still need further confirmation on the vaccine’s quality, production process and distribution,” he said last November.

Given the possible logistics issues on the country’s vaccination program, he was cautiously optimistic about the JCI’s outlook this year and projected the index to reach a more modest forecast of 6,400, as he believed that the vaccinations would not be completed globally by the first quarter.

“We think the evidence of economic recovery can only be seen by the second half of 2021,” said Frederik.

Investment manager Schroders Indonesia head of intermediaries Felita Elizabeth also echoed the sentiment, saying that the vaccine logistics in the country could be a risk in the stock market rally this year.

“Our capital market may have priced in some recovery [since 2020] but it has yet to reach its maximum level like the US did because some market players are questioning whether the vaccine can be really distributed without a hitch,” she said.

She also told investors to keep a close eye on the implementation of the Job Creation Law, the recently passed law that aims to cut bureaucratic red tape and attract investment to the country. The government is currently working on the derivate regulations, which Felita expected to determine investors’ confidence in Indonesia’s economy.  

The expectation of lingering economic turbulence this year also prompted the IDX to set a modest target for 2021, including the boom in the number of retail investors last year.

President director Inarno Djajadi said on Dec. 1 last year that the bourse aimed to increase the number of new retail investors by 22 percent, lower than the growth last year. As of Nov. 19, the Indonesian Central Securities Depository (KSEI) had recorded a 42.19 percent increase in retail investors to 3.53 million.

“The work-from-home order has encouraged people to try investing their funds in the capital market, so we believe the number of investors can increase further next year,” he said. “However, this pandemic is not over yet so we need to be conservative.”

The bourse is also targeting an average daily turnover of Rp 8.8 trillion in 2021, lower than the Rp 9 trillion in average daily turnover recorded as of Dec. 19, as it expected the high volatility to continue.

The IDX also aims to list at least 30 new companies this year, fewer than the 51 companies that, as of the end of 2020, had gone public in the bourse.

Inarno added that the exchange was hoping to launch electronic initial public offerings (e-IPOs) next year aimed at accommodating the growing number of retail investors in the country’s stock market.

“The e-IPOs will allow for a minimum allotment for retail investors so they won’t be discouraged when buying stocks in the primary market,” Financial Services Authority (OJK) capital market monitoring head Luthfy Zain Fuady said on Dec. 1.

IDX assessment director I Gede Nyoman Yetna also added that the e-IPO mechanism would help create fair pricing for IPOs and prevent mark-ups that would inflate the share price on the primary market.

The OJK has also issued a regulation on a disgorgement fund to protect investors from illegal conduct as stakeholders stress the importance of proper fund management and education for retail investors.

Read also: Implementation, education key as disgorgement fund scheme to take effect in July

OJK Regulation No. 65/2020 stipulates that the authority will force individuals, firms, associations or organized groups who have received gains through illegal or unethical business transactions in the capital market to pay the proceeds back to investors and pay penalties. The regulation will become effective in July.

Although the IDX set a conservative IPO target this year, OJK chief executive of capital market supervision Hoesen was still confident that capital market fundraising would generate Rp 130 trillion to 160 trillion this year from both new stocks and debt issuances.

The figure is about 30 to 60 percent higher than 2020’s projection of Rp 100 trillion.

“We expect the real sector’s funding needs to bounce back as they need to expand their business this year,” he said.

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