Political Concerns 2024, Here's the Prospect for the Capital Market
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By wartaekonomi.co.id
News | January 17, 2024
BNI Sekuritas predicts that 2023 will bring significant challenges to the global financial market as the world adapts to post-pandemic life. The year is considered the start of adapting to new conditions, while 2024 is considered the year of normalization. Economic turmoil will be characterized by uncertainty, with fears of a recession and inflation. Risk fluctuations in US mid-range banks in March 2023 exacerbated market concerns. China is also experiencing difficulties in its economic recovery.
"However, sentiment begins to improve in the second half of 2023, with hopes that the market will shift from stagflation to a "soft landing" narrative, though there are concerns that interest rates will likely remain at high levels for a longer period of time," SEVP Research BNI Sekuritas Erwan Teguh, said in an official statement in Jakarta on Thursday (21/12/2023).
Meanwhile, Indonesia is dealing with comparable issues in transitioning to the post-pandemic environment. The primary headwinds were a severe drop in key commodity prices and a jump in rice costs, prompting the central bank to suddenly raise interest rates in October 2023. However, in November 2023, Bank Indonesia ceased raising interest rates because to the Rupiah's steady exchange rate, which increased by roughly 2.5% every month. Market optimism is expected to grow again in 2024. Concerns about inflation and recession are easing, with GDP expected to recover to pre-pandemic levels.
“China remains a particular concern with much of the consensus being pessimistic regarding property sector risks, demographic challenges and restructuring of global supply chains. "Nevertheless, US-China relations may have reached their lowest point, and the high geopolitical risks are reflected in the potentially widespread Israel-Gaza conflict," said Erwan.
Indonesia's GDP growth is expected to return to normalization, with potential inflation due to El-Nino weather. Bank Indonesia plans to cut interest rates by 50 bps at the end of 2024 to support growth. Aggregate net profit growth is projected at 8%/11% in FY24F. BNI Sekuritas predicts a green JCI market in Indonesia amidst political turmoil, with the democratic party set to take place in February 2024. The market is expected to be positive, but cautious due to the country's strong foundation in renewable energy and electric vehicles, leading to timely funding for companies.
"Expectations for a recovery in consumption and investment drive, along with the view that the country's per capita income has surpassed US$5k have also improved the overall growth prospects. Therefore, BNI Sekuritas believes that activities such as IPOs and other fundraising efforts will continue with high enthusiasm in 2024," said Erwan.
BNI Sekuritas predicts a potential decline in the JCI at 6600, with an increase of 8400, largely influenced by Federal Reserve decisions regarding interest rates, which either did not reduce rates or successfully prevented a US recession.
“2024 will be a year of normalization in which global financial markets move towards stability after a period of intensive adjustment. While challenges remain, opportunities for smart and strategic investment positions still exist. "The main key is flexibility and reaction to changing market dynamics," concluded Erwan.