Indonesia set to lead regional gains next year

Indonesia set to lead regional gains next year

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.

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Alan Richardson, a fund manager at Samsung Asset Management in Hong Kong, said Indonesia is poised for a strong 2022 because of the approaching vaccine thresholds that allow full re- opening and faster growth momentum.

Easing restrictions as regional coronaviruses 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. The upgrades of the equity market this month by 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 compared to 17% consensus estimates. That is higher than the bank's 9% outlook for the MSCI Asia Pacific ex Japan Index.

In a Nov. 25 report, Credit Suisse Group AG strategists wrote that the addition of consumer confidence and automotive sales will also contribute to a significant acceleration in economic growth next year.

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Singapore and Thailand could emerge as strong contenders for Indonesian stocks top spot in Southeast Asia if both countries continue to open 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 near a two-year high.

According to Bloomberg, some $870 million net foreign funds flown into Indonesian equities this quarter from a total of $1.92 billion in Southeast Asian shares excluding Singapore and Vietnam, while the nation s local currency government bonds are the region's top performers in the second half.

In order to gain exposure to the region's reopening and economic recovery, Indonesia is a net energy exporter and is starting to reopen, according to Ray Farris, chief investment officer for South Asia at Credit Suisse, in the bank's 2022 outlook report.

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