Indonesian Stock Market Has Further Upside Potential... Investors Should Respond by Increasing Allocation

On July 23, Daishin Securities advised investors to "increase their allocation" to the Indonesian stock market, which has recorded the highest growth rate among emerging markets, citing additional upward factors such as the conclusion of trade negotiations with the United States and economic stimulus policies.

Moon Geonwoo, a researcher at Daishin Securities, stated in the report "Indonesia Trade Negotiation Conclusion: The Beginning of Stock Market Rally" released on the same day, "The current 12-month forward price-to-earnings (PE) ratio of the Jakarta Composite Index (JCI) is 11.9, which is significantly lower than the recent five-year average of 17.4, indicating considerable room for further gains."

The Jakarta Composite Index has risen nearly 7% this month, recording a higher growth rate compared to major emerging markets such as China. Moon explained, "Although the Organization for Economic Cooperation and Development (OECD) lowered Indonesia's 2025 economic growth forecast by 0.2 percentage points to 4.7%, the July 15 conclusion of the Indonesia-US trade negotiations, the July 16 central bank policy rate cut (to 5.25%), and the government's announcement of economic stimulus policies have acted as upward drivers for the stock market."

In particular, regarding the conclusion of the trade negotiations with the United States, he noted that Indonesian President Prabowo Subianto emphasized securing global competitiveness through lower tariff rates and strengthening supply chains for major export items such as palm oil and labor-intensive goods. He stressed the importance of "focusing on the real impact." Indonesia is expected to benefit substantially from future tariff reductions, as it currently faces a lower tariff rate (19%) compared to competing ASEAN countries, and its exports to the United States in 2024 amounted to $26.3 billion, while imports were only $9.5 billion.

Moon also pointed out, "The Indonesian government has demonstrated its commitment to economic stimulus by introducing a 24 trillion rupiah consumption-boosting package and cutting the central bank policy rate. In addition, it has submitted a letter of accession to the OECD and announced a reduction in the free meal budget to secure fiscal soundness." He added, "If you are looking to invest in emerging markets where uncertainty is easing due to the conclusion of trade negotiations with the United States and expectations for economic growth are being reflected, it is necessary to increase your allocation to the Indonesian stock market."