Anuchit Nguyen and Ishika Mookerjee – Rising commodity prices and easing border restrictions will probably fuel economic growth that helps Indonesia's key stock index extend its record to lead regional gains next year, analysts predict.
"Indonesia is setting up for a strong 2022 because it is approaching vaccination thresholds that facilitate full re-opening and faster growth momentum," said Alan Richardson, a fund manager at Samsung Asset Management in Hong Kong.
Easing restrictions as regional coronavirus infections abate along with high prices of the commodities Indonesia exports – palm oil, crude oil and coal – have attracted inflows into the nation's stocks and bonds. That's prompted upgrades of its equity market this month by the likes of Goldman Sachs Group Inc., while Morgan Stanley and BlackRock Inc. also rate it as overweight.
Goldman Sachs predicts 19% earnings-per-share growth for the market next year versus 17% consensus estimates. That's higher than the bank's 9% outlook for the MSCI Asia Pacific ex Japan Index.
Adding to Indonesia's appeal are improving consumer confidence and automotive sales that will also contribute to a "significant" acceleration in economic growth next year, Credit Suisse Group AG strategists wrote in a Nov. 25 report.
Singapore and Thailand could emerge as strong contenders to Indonesian stocks' top spot in Southeast Asia if both countries continue to reopen borders to tourism as a new Covid-19 variant emerges, and as banks are seen benefiting from reflation. Singapore's Straits Times Index is close to erasing its pandemic-triggered losses and Thai stocks are trading near a two-year high.
Some $870 million net foreign funds flowed into Indonesian equities this quarter from a total $1.92 billion into Southeast Asian shares excluding Singapore and Vietnam, according to data compiled by Bloomberg, while the nation's local currency government bonds are the region's top performers in the second half.
"Indonesia stands out as our preferred means to gain exposure to the region's reopening and economic recovery – it is a net energy exporter and is starting to reopen after containing the recent wave of Covid-19 contagion, plus its equities are still early in the recovery cycle," Ray Farris, chief investment officer for South Asia at Credit Suisse, said in the bank's 2022 outlook report.