JAKARTA • With Indonesians voting in presidential and legislative elections yesterday, investors are weighing the prospects for the South-east Asian nation's US$522 billion (S$706 billion) stock market after the dust settles.
The Jakarta Composite Index could be a prime second-half rebound candidate. It is up only 4.6 per cent this year, and lags behind the 12 per cent rally in the MSCI Asia Pacific Index after outperforming it just a year ago.
Agricultural stocks are the main drag on gains in Indonesia.
The country's stock market was closed yesterday.
There may be a "post-election rally", assuming a clear election result, said Mr Ferry Wong, head of Indonesian equity research at Citigroup Inc.
"The rally will likely be driven mainly by domestic investors as they are the ones who seem more cautious on the election outcome versus foreign investors," he said.
Overseas investors had been flooding back to Indonesia ahead of the election, buying some US$1 billion in stocks in the market this year, the most in South-east Asia, data compiled by Bloomberg showed.
The rally will likely be driven mainly by domestic investors as they are the ones who seem more cautious on the election outcome versus foreign investors.
MR FERRY WONG, head of Indonesian equity research at Citigroup Inc.
The market has rallied six months before and after every election since direct presidential polls were introduced in 2004.
One group of stocks that traders have been buying up is construction companies.
The Jakarta Construction, Property and Real Estate Index has gained 13 per cent this year, making it the best sub-gauge in the stock market.
For some strategists, no matter who becomes the country's next leader, infrastructure-related shares will extend gains as development will carry on regardless of the election result.
Last week, PT Sucorinvest's Jemmy Paul said Indonesia needs to develop infrastructure massively.
The International Monetary Fund projects 5.2 per cent growth for Indonesia both this year and in 2020, similar to the 5.2 per cent growth last year.
While first-quarter data suggests some deceleration moving into 2019, "solid economic fundamentals should help Indonesian assets outperform this year", Mr Win Thin, global head of currency strategy with Brown Brothers Harriman & Co, said in a note to clients.
Mr Christopher Watson, London-based portfolio manager for total return strategy at Finisterre Capital, said in an interview in Hong Kong: "Indonesia has the luxury where it is an economy that naturally wants to grow.
"Demographics are in its favour. You have a large population, you have a reasonable resource base, increasing potential for the development of manufacturing."