Scouring for the Market's Silver Lining
Key Takeaways:
▪️As we step into 2024, our projections foresee a gradual alleviation of global inflationary pressures, opening the possibility for monetary easing. The Indonesian Government's well-executed policy mix in 2023 has yielded positive results, showcasing the strength of the national economy amidst global uncertainties.
▪️In FY24E, the capital market is poised to be influenced by several key factors, including: 1) Government Stimulus to Strengthen the Domestic through; 2) Examining the Transient Impact of Election Boost on Consumption; 3) Concerns about escalating geopolitical tensions.
▪️In Bond market, we observe a narrowing spread between Indo GB and UST, a decline in risk premiums in Indonesia, and a substantial influx of foreign funds into SBN, pointing towards a shifting financial landscape. The Indo GB 10-year yield for FY24E could initially surge due to fund flows towards th e UST, later stabilizing at 6.28% (base case), 6.58% (bear case), or 6.13% (bull case).
▪️Meanwhile, the Equity Market is manifesting signs of a nuanced reorientation towards rationality, as investors return to realign with fundamental principles. Our JCI Target 2024 relies on a 3%-8% EPS growth forecast, leading us to uphold our fundamental JCI target of 7,700 for the base scenario, 6,900 for the bear scenario, and 8,100 for the bull scenario. Sector Rating and Stock Selection by: 1) Earnings resilience; 2) Interest rate sensitive proxies; 3) Higher dividend yield; 4) Election momentum. We are overweight on banks, telco, property, consumer non-cyclical and utilities. Our top picks: BMRI, BRIS, TLKM, HMSP, BSDE, SMRA, JSMR, PGEO.
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