Indonesia’s Jakarta Composite Index may have hit some bumps along the way in 2022, but at Monday’s close, it’s the top performing Asia-Pacific index of the year.
The index is up 6. 51% since the start of the year.
In contrast, Hong Kong’s Hang Seng Index, South Korea’s Kospi and Taiwan’s Taiex have plunged more than 25% this year.
The Shanghai Composite and the Shenzhen Component in mainland China were also affected, falling by only 17% and 27% respectively.
Japan’s Nikkei 225 Index, India’s Nifty 50 Index and Thailand’s SET Index posted single-digit losses.
Singapore’s Straits Times index is the second best performer in the region, down just 0. 53%.
The Jakarta Composite Index fell sharply in May and July before recovering, and has remained above 7,000 since early August.
Foreign investment in equities boosted the index and Indonesia is reaping benefits from higher commodity prices, according to Maynard Arif, head of Indonesian equities at DBS Group Research. The Southeast Asian country is an exporter of raw materials.
The economic recovery there has been on the rise after Covid restrictions were lifted, evolved economies experienced this momentum earlier, he added.
“The 2022 earnings expansion in [the] Indonesian market remains solid, even after a recovery in 2021 from a weak base,” Maynard told CNBC in an email.
He added that DBS remains bullish in Indonesia, facing headwinds from U. S. Federal Reserve interest rate hikes. The U. S. economy and a strong dollar have triggered government bond outflows this year.
“The valuation would possibly look expensive [compared to] other countries, but it can be justified given Indonesia’s prospects and growth,” he said.
However, falling commodity costs are cause for uncertainty for Indonesia, said Manishi Raychaudhuri, head of Asia-Pacific equity studies at BNP Paribas.
“Given the drop in energy costs. . . we recommend caution and agility to the power sector in particular, and Indonesia in general,” he wrote in a report dated Sept. 28.
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Elsewhere in Southeast Asia, Singapore has a “broad representation” of corporations, such as banks, that take advantage of emerging yields, Raychaudhuri said, adding that the country and India, Indonesia and Malaysia are “pockets of security. “
Suresh Tantia, senior investment strategist at Credit Suisse, said the influx of tourists is supporting the economy and market after it reopens.
Tantia said Credit Suisse lately prefers South Asian markets to North Asian markets, given the export-dependent nature of markets such as South Korea, Taiwan and China.
“South Korea and Taiwan, we may see more pressure, a slowdown in export growth, currencies remain weak and we also see weakened demand for the chip sector, which is very vital for either market,” he told CNBC.
Timothy Moe, leading Asia-Pacific equity strategist at Goldman Sachs, said there are 3 points for Southeast Asian markets.
These come with their delayed recovery from Covid, the emergence of a virtual or “new” economy, and emerging interest rates.
“ASEAN markets are heavily exposed to banks, and banks have not been in the right position for the past 10 years,” he told CNBC’s Street Signs Asia on Tuesday. “But now they are, with the change in the interest rate cycle, and so this has been a very significant tailwind for ASEAN markets. “
Taiwan is highly exposed to the slowdown in the economy and has also experienced increased geopolitical tensions with China.
Meanwhile, the percentage of foreign ownership of South Korean shares is at its lowest level in a decade, he added. But it would possibly mean the country is a smart candidate to invest in North Asia, Moe added.
He noted that South Korea has no geopolitical considerations like neighboring economies and that its currency has been sold this year.
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