Investment analyst, equities
Aberdeen Standard Investments
The market sentiment has been weak.
Rising oil price is posing fiscal risks, while the risk of a weaker rupiah could be felt much later on as the rising import costs of raw materials could give downside surprise towards inflation.
Although we are constructive on the Indonesian market long-term, there are still plenty of challenges ahead.
Weaker global demand and lower prices for its main commodity – including coal and palm oil – exports mean export revenues are likely to remain low by past standards.
Meanwhile, spending on infrastructure will need to slow if the government is to keep the budget deficit within the 3% of gross domestic product mandatory limit. Tighter monetary policy will weigh on consumer demand in the short term.
We believe that the core strategy to navigate this market is to remain holding quality company with a strong moat, healthy balance sheet or cash flow generation, and backed with capable management.
The market correction provides opportunity for long-term investors like us to buy quality companies at a more palatable valuation.