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Capital market's role in recovering national economy

Jakarta Globe - February 16, 2023

Jakarta – Portfolio investment is on the rise in Indonesia and the country's capital market can help indicate the national economic growth, according to a recent forum.

Earlier this week, fintech startup Pluang in partnership with media group B-Universe Media Holdings hosted the 2023 Economic Outlook forum.

The first session took a deep dive into the capital market's role in the national economy with stakeholders in the financial sector joining in as the panelists. Chief Economic Minister Airlangga Hartarto also kicked off the panel discussion by giving the audience some insight into Indonesia's economy.

According to Airlangga, the state budget over the past year has become a shock absorber to control inflation and maintain purchasing power. This caused Indonesia's economy to grow by 5.31 percent, even surpassing most G20 countries but the Southeast Asian country is still falling behind Saudi Arabia.

"In 2023, the government will make a number of efforts to boost the foreign exchange [forex] reserves and prepare the forex stimulus so we can maximize the potential of export commodities," Airlangga said.

Adi Budiarso, the head of the financial sector policy at the Finance Ministry, said the 2023 state budget has also returned to fiscal discipline with a below-three-percent deficit.

"The government will remain committed to ramping up the economy's productivity to keep up this economic recovery moment amidst the looming recession this year," Adi said while adding that the government would try to keep the deficit and debts under control, as well as improving the effectiveness of the fiscal reforms.

At the same conference, the Financial Services Authority (OJK) also highlighted the 2023 law on the financial sector strengthening as a regulatory outlook benchmark for the year ahead.

"The details in this law call for coordination between the ministries and agencies. For instance, in carbon trading, developing financial derivatives, and the management of technological innovations in the financial sector," Luthfy Zain Fuady, the head of capital market regulation at the OJK, said.

"The financial sector strengthening law aims to protect the consumers. Its security investor protection fund [SIPF] is expected to ensure safe transactions in the capital market. Going forward, OJK wishes to work with law enforcement institutions to take action against the criminal cases in the financial market," Luthfy added.

The Indonesian Fintech Association (AFTECH) also shared its insight. AFTECH chair Pandu Sjahrir said the financial industry players should work on improving public trust.

"Don't let there be any false sense of confidence. Financial crime has a long-term effect on the public's perception towards the financial sector, starting from discomfort to antipathy towards a certain financial product," Pandu said.

"Regulators should have the capacity to take action against similar cases. [...] The 2023 law on financial sector strengthening is already quite comprehensive to regulate the highly dynamic financial sector," Pandu said.

Claudia Kolonas, the head of asset management at AFTECH, said that investors should diversify their asset composition.

According to Claudia, stocks are still relevant as an attractive investment alternative despite the volatile market. In the second semester of 2023, the campaigns ahead of the elections in 2024 can become a catalyst to support the stock rally in large-cap sectors. Investors should also consider bonds such as fixed income funds during the same period as the yield of the government securities would become more stable.

"The central bank BI's decision to increase the interest rate to 5.75 percent could lead to a more attractive yield from money market funds this year," Claudia said.

Retail investors are currently on the rise in Indonesia. The Indonesian Stock Exchange (IDX) also reported that it saw the launch of 67 new instruments in 2022.

"This year, the IDX is aiming for 70 new instruments," Gede Nyoman Yetna, the corporate appraisal director at the IDX, said.

Pluang also invited Pluang Plus members, namely the wealth tech app's premium tier users, to attend the 2023 Economic Outlook forum in a bid to boost investors' financial literacy.

Source: https://jakartaglobe.id/special-updates/capital-markets-role-in-recovering-national-econom