Indonesian Stocks Expected to Hit Record in 2020: JPMorgan

After two years of stagnant growth, Indonesian stocks will hit a record in 2020, when President Joko Widodos policies to shore up the economy take effect, say analysts from JPMorgan and Morgan Stanley.

JPMorgan, which says it‘s the most bullish on the Street, sees the benchmark Jakarta Composite Index rallying 19% from the current level to a record 7,250 by the end of 2020. Morgan Stanley expects the MSCI Indonesia Index to surge 11% to 7,800. Both brokerages are overweight the nation’s equities.

The Indonesian benchmark gauges are slated for their second annual decline after rallying more than 30% in the previous two years. In his final term that began in October, Jokowi, as Widodo is known, has shown an urgency in pursuing tough reforms such as an overhaul of labor laws, a roadmap for lower corporate taxes and the streamlining of multitude of rules hampering foreign investors.

JPMorgan is overweight PT Bank Central Asia, PT Bank Mandiri, PT Summarecon Agung, PT Ciputra Development, PT Jasa Marga, PT Semen Indonesia, PT Telekomunikasi Indonesia, PT XL Axiata, PT Indofood Sukses Makmur and PT Mitra Adiperkasa; its underweight PT Adaro Energy, PT United Tractors and PT Matahari Department Store.

A macro downturn, the widening of the current-account deficit and a weakening rupiah are risks, according to Henry Wibowo, an analyst at JPMorgan.

Business activity will increase thanks to optimized state-owned firms and private companies. That will contribute to 10% earnings growth in 2020, said Morgan Stanley analysts Mulya Chandra and Yulinda Hartanto.

Bank Indonesia kept its benchmark policy rate unchanged at its November meeting, while pumping more liquidity into the financial system by cutting the reserve ratio to stimulate growth.