Indonesia's stock market loses its sheen as China reopens


Jakarta index flat for the year vs gains for broader Asia index


Rival regional markets benefit more from China’s reopening


Indonesia’s market slowdown hits IPO pipeline


Profit growth to slow as commodities prices ease

By Patturaja Murugaboopathy and Ankur Banerjee

March 2 (Reuters) – Indonesian equities, a haven for international investors last year as prices of commodities soared, is now losing out to neighbours and North Asia as its economy slows and the other markets stand to benefit more from China reopening its borders.

The broader Jakarta index was one of the few markets to book gains last year, rallying 4% compared with a 20% decline in MSCI Asia-Pacific index as its commodity exports surged and helped revive consumer spending after the pandemic.

But that encouraging run is ending. The Jakarta index is broadly flat this year, versus a 3% gain for the Asia-Pacific index as rising inflation eats into consumers’ wealth.

Vikas Pershad, portfolio manager at M&G Investments, says investors are worried about the reluctance among Indonesian consumers to spend.

“Capital is not infinite. So if an investor has a choice to make, we can see why some with a short-term time horizon might shift from Southeast Asia or South Asia to North Asia, given their underperformance last year.”

Foreigners have been selling Indonesian stocks. In contrast, North Asian equities have seen inflows as they bet China’s economic reopening and removal of travel restrictions will boost trade and services in the neighbourhood.

Overseas investors sold $1.17 billion worth of Indonesian equities in the last three months, but they put down $13.78 billion in China and $4.86 billion in South Korea, according to data from stock exchanges.

“We suspect investors were probably ‘hiding’ in Indonesia last year as North Asia significantly underperformed and are repositioning given the improved outlook in North Asia,” said Zhikai Chen, head of Asian equities at BNP Paribas Asset Management.

The meagre returns in the equity market have affected the IPO pipeline.

Indonesian companies have raised just $1 billion through primary and secondary listings this year, a nearly 20% drop compared with the same period in 2022, according to Refinitiv data.


As prices of Indonesia’s major export items such as palm oil and coal ease, analysts predict business profit growth will slow, while higher borrowing costs squeeze margins.

Indonesia’s consumer discretionary sectors’ cumulative profits are expected to decline 0.5% this year, after rising 48% last year, while earnings of energy and industrial sectors’ are also expected to decline by 26% and 8%, respectively, this year, according to Refinitiv data.

“The growth outlook for a market like Indonesia would take some kind of a hit if the commodity rally took a breather,” said Rajat Agarwal, Asia equity strategist at Societe Generale.

“That is where I would be relatively less enthusiastic about Indonesia compared to a market like India.”

To be sure, inflation in the country has eased to 5.28% in January and Bank Indonesia earlier this month kept its key interest rate unchanged and said the current level should be enough to guide inflation back to target.

Herald van de Linde, head of Asia equity strategy at HSBC, expects Indonesia’s earnings growth to slow from 36% in 2022 to 4% in 2023.

“It will go from being one of the fastest growing markets last year to below average in 2023,” he said.

Reporting By Patturaja Murugaboopathy, Gaurav Dogra in Bengaluru, Ankur Banerjee in Singapore Editing by Vidya Ranganathan & Shri Navaratnam