Indonesia “punches notably below its weight”, says Chris Anstey on Bloomberg. The country has the world’s fourth-biggest population and sits on “geographically pivotal” maritime trade routes between the Pacific and Indian oceans. Yet growth has lagged that of neighbours such as the Philippines and Vietnam over the last ten years, while per capita GDP “is little more than half that of Thailand’s”.
But soaring commodity prices may change the picture, says Barclays. Indonesia is running “large trade surpluses in palm oil, natural gas, coal, copper, rubber, iron and steel”. Higher export earnings have boosted the rupiah, which has been the best-performing Asian currency against the dollar over the past two years.
Attracting investment
Still, Indonesia will need to remedy its growth problem in order to build on this opportunity, says Shotaro Tani in Nikkei Asia. Growth has averaged 5% in recent years, less than the 6% level that the government thinks it needs to avoid the middle-income trap. President Joko Widodo has done a good job of addressing the country’s long-standing infrastructure problems, with 6,240km of roads and 15 new airports being rolled out during his first six years in office.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Now his government is planning to start restricting the export of unprocessed minerals, including nickel, tin, bauxite, gold and copper in order to encourage foreign companies to invest in more manufacturing capacity domestically. This strategy means the government is rolling out the red carpet for international investors.
GoTo growth
The MSCI Indonesia stock index has gained 13% so far this year, bucking a gloomy start to the year for emerging markets. Foreign investors are noticing: inflows of $0.7bn into the stockmarket this month have been large relative to its recent history, say analysts at DBS. Financial stocks make up more than half of the index: banks were hardest hit by the pandemic crisis, but now look well-placed to ride the “long runway” of an earnings recovery, says Societe Generale.
Other sectors, such as tech, point to the future. Local super-app GoTo listed this month, raising Rp15.8trn (£0.87bn), says TechCrunch. The listing, which made GoTo Indonesia’s fourth-biggest publicly traded company, is notable because the IPO market has been so flat globally this year. The shares enjoyed a post-flotation pop, but they have since dropped below the listing price.
The GoTo float was richly valued, say Tim Culpan and Andy Mukherjee on Bloomberg. But that speaks to excitement about the growing middle class and digital economy. Indonesia’s 273 million people are “mostly young, increasingly connected, and eagerly embracing the convenience economy”.
• SEE ALSO
• The bond-market bloodbath isn’t over yet
• Why food and fuel subsidies will push up debt
-
Millions of cash ISA savers are missing out on hundreds of poundsBillions of pounds are languishing in cash ISAs that pay an interest rate of 1.5% or less.
-
Keller presents low debt and ample scope for growthGeotechnical contractor Keller, which supports vital global infrastructure, boasts rising profits and a cheap valuation
-
Building firm Keller presents low debt and ample scope for growthGeotechnical contractor Keller, which supports vital global infrastructure, boasts rising profits and a cheap valuation
-
PZ Cussons share price down 75% in last decade – why it's one to watchOpinion Once-strong consumer-goods business PZ Cussons is out of favour with the market. That spells opportunity for investors, says Jamie Ward
-
Cash in on the biotech sector with specialist trust BioPharmaOpinion BioPharma has an attractive niche in lending to asset-rich biotechnology companies
-
India's stock market decline wipes out $1.3 trillion in market value – can investors stay optimistic?More than $1 trillion has been wiped off from India's stock market after investors turn to China. Has the emerging-market darling hit rock bottom?
-
Pensions revolution: how to profit from the trends shaping the UK pension systemThe UK pension system is one of the biggest in the world. Big changes are under way, says Rupert Hargreaves
-
Large cap stocks start to struggle – is it time for investors to reassess their focus?Buying quality large caps worked very well last decade. A more volatile world will be a bigger challenge for these star stocks, says Cris Sholto Heaton
-
How to generate income with fixed-interest investmentsPublic debt is overvalued, but other fixed-interest investments now look like a bargain, says Max King
-
Three top-notch Taiwanese companies cashing in on the advent of AIOpinion Eric Chan, investment director and co-manager of the Aberdeen Asian Income Fund, highlights three potential Taiwanese winners in the technology industry
