Indonesia’s benchmark stock index will probably rally as much as 20 percent by year-end as a weak rupiah boosts export earnings, while election spending supports consumer and media companies, according to the nation’s second-largest money manager.
Yields on the country’s 10-year government bonds will probably drop to 7.5 percent by December from about 9 percent, Alvin Pattisahusiwa, who oversees about $3.3 billion as chief investment officer of PT Manulife Asset Management Indonesia, said in a phone interview today. The nation’s rupiah bonds are the developing world’s worst performers in the past three months, while the benchmark Jakarta Composite Index has dropped 5.4 percent.
Indonesian assets have retreated amid concern that the nation’s current-account deficit and weak currency will spur capital outflows as the U.S. Federal Reserve pares stimulus. Political parties in Southeast Asia’s biggest economy typically boost advertising spending while distributing food, consumer staples and t-shirts to supporters before polls. Parliamentary elections are due on April 9 and the first round of a presidential vote is scheduled for July 9.
“The elections are a positive factor for the market,” Pattisahusiwa said. “With thousands of people campaigning for seats in the parliament, the amount of money they spend to win the vote would be good for the economy and for consumers.”
The Jakarta index gained 87 percent in 2009 and 45 percent in 2004, the previous two election years. The gauge is valued at 13 times estimated earnings for the next 12 months, compared with 9.1 times for the MSCI Emerging Markets Index, according to data compiled by Bloomberg.
Manulife has PT Astra International, PT Bank Central Asia, PT Bank Mandiri and PT Telekomunikasi Indonesia among its top equity holdings, according to the company’s fund factsheets.
The yield on the government’s 8.375 percent notes due March 2024 have surged 64 basis points, or 0.64 percentage point, so far this year to 9.09 percent, according to the Inter Dealer Market Association.
Yields climbed 326 basis points last year as inflation accelerated to a four-year high of 8.79 percent in August. Consumer-price gains have since eased to 8.4 percent in December and may decelerate to as low as 3.5 percent this year, according to the central bank.
“The current yield on 10-year government bonds at about 9 percent is attractive enough for us to start collecting,” Pattisahusiwa said.
The rupiah will trade at about 12,000 per dollar this year, he said. The currency, which plunged 21 percent last year, strengthened 0.3 percent to 12,195 as of 4 p.m. local time, prices from local banks show. The Jakarta stock index rose 0.4 percent.