Global stock market fluctuated in March, what factors influenced it?
Global market sentiment was overshadowed by several factors, such as surge in commodity prices due to Russia-Ukraine conflict, The Fed's aggressive interest rate policy posture, and spike in COVID-19 cases in China. These three factors are interconnected because they have an impact on global economic growth outlook. Surge in commodity prices can affect inflation globally and have an impact on people's purchasing power, and may affect policy posture of global central banks to become more aggressive in dealing with inflation. Market sentiment has also been weighed down again by soaring COVID-19 cases in China, especially due to China’s “zero covid” policy that can cause widespread lockdown and affect China’s capability as “world’s factory”.
Contrary to global market volatility, Indonesia’s stock market consistently recorded positive performance throughout the year. What supported market performance and will this strengthening continue?
We think Indonesia is currently in the “sweet spot” which has gotten Indonesia’s stock market back into investors’ radar. Some of the factors that have become catalysts for Indonesia’s stock market are:
•From macroeconomic perspective, Indonesia is currently in the recovery cycle, attractive for investors looking for growth amid global economic normalization trend today.
•Indonesia is a net commodity exporter that is seen as being benefited by the current rise in commodity prices and can become a safe haven for global investors.
•Rupiah exchange rate stability and solid macro economy.
•Indonesia and ASEAN’s neutral position in the midst of geopolitical tensions between western countries and Russia minimizes geopolitical risks on Indonesia.
Overall, we have positive outlook on Indonesia’s market this year, supported by a mix of supporting factors from domestic economic recovery and global market dynamics that are supportive for Indonesia.
The Fed raised interest rate to 0.5% on March and signals an aggressive interest rate hike direction, does this have negative impact on stock market outlook?
FOMC meeting on March became a turning point for the market, with The Fed reaffirming its policy focus on tackling inflation and emphasized that the economy is already strong enough to deal with interest rate hikes. The clarity of The Fed’s policy direction reduced speculations in the market and supported improved sentiment as seen in S&P 500 performance that rebounds after The Fed’s FOMC meeting. In our view the market has priced-in The Fed’s move so the aggressive interest rate outlook did not have negative impact on stock market outlook. On the other side, we think that market expectations are too aggressive, which, based on Bloomberg data, market expectation on Fed rate can reach up to 2.25%-2.50% this year, higher than The Fed’s 2% median projection. Therefore, there is a potential for good news for the market if The Fed’s rate hike is not as aggressive as the market has expected.
Asia is seen as being disadvantaged by rising commodity prices, what is your view on this?
Asia is a vast and diverse region, so it is too generic to label Asia as such. Commodity-producing countries in Asia such as Indonesia certainly benefit from the current high commodity prices. Meanwhile, commodity-importing countries are not necessarily disadvantaged either, because their export performance is also strong. For instance, South Korea and Taiwan are commodity importer but they are supported by strong exports of electronics and semiconductors amid current digitalization trend. Overall, we see Asia as an attractive region for investors to diversify from European region that is exposed to Russia, or the United States that has just entered rate tightening cycle.
What is the impact of rising global commodity prices on Indonesia’s inflation and Bank Indonesia’s interest rate policy?
The impact of rising commodity prices on Indonesia’s inflation is relatively more gradual compared to developed countries. In Indonesia, there are commodities whose prices are regulated by the government so that they act as buffer against rising commodity prices. The consequence is that there will be fiscal pressure for subsidies. But government revenues are also potentially better this year, contributed by strong commodity exports that can ease the country's fiscal pressure.
Bank Indonesia still maintains accommodative views, although the prospect of inflation tends to increase as global commodity prices are rising. BI emphasized that low interest rates policy will be maintained until there is fundamental inflationary pressure in core inflation. BI is unlikely to react to inflation in volatile and administered price goods. Interest rate is projected to remain manageable as long as core inflation level is maintained, while rupiah is supported by good external stability.
What is your portfolio strategy in the midst of dynamic market condition today?
Amid dynamic global condition, our portfolio strategy is focused on major themes that are fundamentally supportive for Indonesia. We see two major themes that have potentials in Indonesia’s market. The first is post-pandemic economic recovery theme, which benefits from public’s pent-up demand. Some sectors with potentials within this theme are banking and property sectors. The second theme is more structural and brings about changes in Indonesia’s economic landscape. We see sectors related to digital economy and green economy related to renewable energy supply chains fall into this category. Both these sectors are attractive, supported by Indonesia’s huge digital economic potentials, and the global trend towards the use of renewable energy to replace fossil energy.
Seeking α adalah komunikasi bulanan yang dirilis oleh PT Manulife Aset Manajemen Indonesia (MAMI). Disampaikan dalam format tanya-jawab, Seeking α ditujukan untuk menyajikan pandangan para ahli investasi MAMI yang berorientasi ke depan, langsung ke hadapan Anda, para investor profesional MAMI. |
Samuel Kesuma. CFA Senior Portfolio Manager-Equity
Samuel memulai karir profesionalnya di industri finansial dengan bekerja di PT Trimegah Securities sebagai Investment Analyst. Sebelum bergabung bersama PT Manulife Aset Manajemen Indonesia (MAMI), Samuel bekerja di PT BNP Paribas Investment Partners sebagai Equity Portfolio Manager, PT Trimegah Asset Management sebagai Equity Fund Manager, Abacus Capital (S) Pte Ltd – Singapura sebagai Corporate Finance Analyst, dan ANZ Bank – Singapura sebagai Investment Consultant. Samuel adalah pemegang sertifikasi Chartered Financial Analyst (CFA). |
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