Investment Highlight 2020
In 1H19, investors were concerned more about the condition of domestic politics whereas currently they have shifted their focus back to the dynamics of the global economy’s condition as well as geopolitical crises until 2020. The Trade & Currency War between the US and China are predicted to evolve until it becomes a Technology War. This phenomenon will slow down the overall growth of the global economy which will eventually result in a recession on 4Q20F. Several events such as: the US President Election in 2020; riots in Hong Kong; geopolitical crises between US and Iran; the trade war; as well as emerging market crises are going to affect the prospect of Indonesia’s capital market in the upcoming 2020. On the domestic side, the growth of the economy is projected to decrease by 4.9%-5.1% in FY20F and is followed by the decrease of corporate earnings as much as 5.28%-7.98% in FY20F. Meanwhile, we ensure that Jokowi’s 2nd term cabinet will increasingly drive the growth of the economy and maintain the stability of the politics in the upcoming 5 years.
Investment Theme: Consumer, Pharmacy and Metal-Mining Sector
MNC Securities (MNCS) Research Team recommends a "Defensive" sector such as Consumer(OVERWEIGHT) and Metal Mining (OVERWEIGHT) as Investment theme choices up to 1H20F. We also include the Pharmacy sector in our watch list as a potential Alpha Return Sector in coming years. MNCS maintains a positive outlook on the Indonesian Stock Market’s Prospects, projecting a JCI target up to 1H20F to these levels: 1)Bull Scenario: 6,371 (PE20F multiple: 15.09x); 2)Bear Scenario: 5,601 (PE20F multiple: 13.61x). MNCS also recommends several prospective and selected stocks based on a bottom-up approach, summarized in the ‘MNCS Stock Matrix.’
