The brokerage raised its forecast for the index to 2,685 from 2,276, while retaining an “overweight” rating for the market, according to a report by Credit Suisse analyst Arief Wana.
“The stronger social-political environment, led by the strong mandate of reelected President Susilo Bambang Yudhoyono, an earnings recovery and a low interest rate environment are likely to spur a rerating of the Indonesian market,” the analyst wrote. “The last period that we saw this was 1992 to 1997.”
The Jakarta Composite has gained 75 percent this year, trailing behind only Peru and Turkey gauges among 89 benchmark indexes tracked by Bloomberg. Yudhoyono’s reelection last month raised expectations the government will maintain policies that helped the economy expand 4 percent in the second quarter and curb inflation to a nine-year low.
The index may return to the record 2,830.26 reached in January last year within the next 12 months, PT Batavia Prosperindo Aset Manajemen said earlier this month. Automotive, banks and property stocks may lead gains, said Ruddy Raharjo, head of investment at Batavia, Indonesia’s sixth-best performing fund in the past five years.
The economy, Southeast Asia’s biggest, may expand by more than 5 percent next year, bolstered by a recovery in the global economy, Finance Minister Sri Mulyani Indrawati said on Aug. 24. Still, inflation may accelerate to more than 5 percent next year partly because of higher demand for goods, Sri Mulyani added.
PT United Tractors, Indonesia’s biggest heavy equipment seller, and PT Astra International, the nation’s biggest auto retailer, are among the brokerage’s top picks in the market. They also favor PT Indofood Sukses Makmur, PT Bank Rakyat Indonesia and PT Perusahaan Gas Negara.
Earnings per share may grow 17 percent among the Indonesian companies covered by Credit Suisse, the analyst wrote. The risks to those estimates are “on the upside,” especially for commodity companies, according to the report.
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