Singapore Stock Strategy - UOB Kay Hian 2023-06-08: To Indonesia Via Singapore

• The Jakarta Composite Index (JCI) has outpaced its Asia-Pacific peers in US dollar terms on a year-to-date basis. After the peak of COVID-19, Indonesia has recovered strongly with the country recording above-consensus 1Q23 GDP growth of 5.03% as well as a very strong 16% y-o-y growth in total investment for the quarter.
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• In this report, we highlight a few companies listed on the SGX that could benefit from Indonesia’s strong economic fundamentals with our top picks being Delfi, Marco Polo Marine and Raffles Medical.

Still-robust GDP growth in 2023.

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• Indonesia's 1Q23 GDP growth of 5.03% y-o-y was higher than consensus forecast of 4.97%. For the remainder of 2023, GDP is expected to be supported by improvement in purchasing power, income expectations optimism, and increasing community mobility. In addition, exports are expected to grow better driven by commodity price hikes and high global demand.
• An upside risk that might boost the national economic growth is the ongoing construction of national strategic project (Proyek Strategis Nasional, PSN) in 2023 which is estimated to carry out 152 projects, which potentially will enhance investment growth.
• Indonesia continued to attract higher total investment in early 2023 at Rp328.9t, registering a robust 16.5% y-o-y growth with the key driver being investment in the metal processing industries in line with the government’s programme to enhance the down-streaming capacities onshore and strengthen the domestic value chain capabilities.
• In terms of job creation, investment into Indonesia in 1Q23 contributed 385,000 new jobs, rising a stellar 21% y-o-y or 46,000 addition vs the previous quarter. Business sentiment is strong, with PMI expanding and with capacity utilisation not yet maximised.
• Credit growth is likely to continue on an upward trajectory, with the loan-to-deposit ratio siting at around 81.5%, which is below pre-pandemic levels. With the government’s pro-investment focus, a 7% increase on infrastructure activity is expected in 2023. Capex might be tightened, with firms cognisant of a slowdown globally.

Consumer confidence not far from all-time highs.

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Adrian LOH UOB Kay Hian Research | Singapore Research Team UOB Kay Hian | https://research.uobkayhian.com/ 2023-06-08 SGinvestors.io

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