Manulife Predicts Better Days for Stock Market in 2016
Jakarta. Indonesia's main stock index could grow by up to 12 percent next year as the country makes its first step toward economic recovery on the back of accelerated government spending and easing of uncertainties resulting from an anticipated rate hike by the US Federal Reserve, a senior executive at Manulife Aset Manajemen Indonesia predicts.
The Jakarta Composite Index has slumped by some 16 percent this year to 4,409.17 as of Tuesday, after taking hits from a lagging economy and a sputtering market, which reached its weakest point in six years during the first half of the year before rebounding slightly.
But the sluggish economy will have likely bottomed out before this year ends, leading to the possibility of a growth rebound next year that's expected to spill over to corporate earnings and the stock index, said Alvin Pattisahusiwa, director of investment at Manulife Aset Manajemen Indonesia.
"Our base assumption is that we will start entering the early phase of recovery next year," Alvin said on Tuesday.
"Some of the characteristics of this will include seeing a rebound in activities, a pick-up in loan growth from consumer and corporate demands, faster growth of profit, and lastly, accommodating and stimulative government policy," Alvin added.
With anticipation of a pick-up in consumption, Alvin also noted that he will be eying stocks in the consumer discretionary sector, such as automotive, as well as the utility sector next year.
Manulife Aset Manajemen Indonesia, which manages up to Rp 43 trillion ($3.06 billion) of assets as of September, projects growth to range from 4.9 percent to 5.2 percent next year, largely in line with the government's target of 5.3 percent. Such growth is expected to spur between 8 percent and 12 percent growth in earnings per share of companies across Indonesia.
The fund manager estimates the JCI to close at around 4,700 this year, with expectations between an 8 percent and 12 percent increase next year — in line with the earnings per share growth — to reach up to some 5,264 next year.
He added that companies should also be more shielded from foreign exchange losses — which had plagued earnings this year — as most of them have already started hedging their debts, thanks to Bank Indonesia's mandate for companies to hedge at least 20 percent of their short-term dollar debts.
"We see corporate earnings getting better next year because economic growth, even with our assumption that the rupiah will range between 14,500 and 15,000 against the US dollar next year," Alvin said.
The rupiah stood at 14,065 against the greenback on Tuesday, reporting a 13 percent decline since the beginning of the year.
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