ASEAN KEY DESTINATIONS
Manulife Aset maintains high hopes for 2016 RI market
One of Indonesia’s biggest fund managers Manulife Aset Manajemen Indonesia (MAMI) has a positive outlook for the country’s financial markets next year although it predicts a volatile rupiah to persist and see the currency touch Rp 15,000 again in 2016.
The firm’s fixed income head Ezra Nazula Ridha said that government bonds remained preferable but high quality corporate bonds with higher yields were another option for investment.
“With a possibility of lower bonds market yields next year, we will focus on government bonds,” he said during a media gathering in South Jakarta on Tuesday.
He forecast next year’s yield from 10-year Indonesian government bonds to stand between 7.65 percent and 8.15 percent, from today’s roughly 9 percent, with total return rates of around 13 percent.
Data compiled by the firm showed that average total returns for the benchmark government bonds from 2004 to 2014 stood at 12.85 percent. However, this year’s return was far lower at 3.88 percent year-to-date (ytd).
Ezra said that manageable inflation and a possible rate cut by Bank Indonesia (BI) in the first half of next year would support a positive fixed-income outlook.
Indonesia recorded inflation of 2.37 percent ytd as of November, according to data from the Central Statistics Agency (BPS). The central bank has targeted inflation of between 3 and 5 percent throughout this year.
MAMI investment director Alvin Pattisahusiwa said that the moderate inflation rate and a manageable current account deficit, currently below 3 percent, gave room for the central bank to cut its interest rate even though the US Federal Reserve was expected to raise its fund rate this week.
He added that the government’s seven economic policy packages should also be supported by monetary policy.
“I hope BI will jump on the [government] bandwagon and change its stance of stability over growth,” he said, adding that the country’s economy had started to regain stability.
Alvin projected that BI would cut its rate by 250 to 500 basis points (bps) in the first quarter next year.
For the equity market, the second largest private fund manager predicted that the benchmark Jakarta Composite Index (JCI) would grow by 8 to 12 percent next year as long as the average price-to-earnings ratio stayed at the current 12 to 13 times. The favorable sectors would be automotive, financial, consumer goods and construction, to name a few.
However, the volatile rupiah, which the firm predicted would reach Rp 14,500 to Rp 15,000, could adversely affect foreign investments as they measure possible currency costs before investing in the stock market.
“Local investors, on the other hand, will not be too affected,” he said, adding that the Fed’s possible tightening would pose only a temporary adjustment to the market.
Data by the index compiler MSCI showed that markets, which were corrected significantly in the run-up to the Fed tightening, appeared to be associated with stronger rallies afterward, he said.
Previously, the country’s largest fund manager Schroder Investment Management Indonesia said that government bonds may continue to be a source of optimism in the local capital market while for the equity market, sectors such as consumer products and the construction industry, would come up strong in the future.
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