Goodbye 2019, Hello 2020!

Happy New Year 2020 Moduers,

The year of 2019 has passed. Dynamics from trade war between United States (US) and China, concerns on recession possibility and Indonesia Presidential election have been the main focus during 2019. Just like watching movie, these focuses have continued and grown into dramas that influenced the psychology of the audience.

Trade war has started since March 2018 with US imposing tariff on import goods and was responded by China. As a result, $250 billion worth of goods from China and $110 billion worth of goods from US were imposed tariff of 10-25%. Meetings were executed to come into an agreement and at last the meeting has reached phase 1 trade war in the month of December 2019 and further tariff could be avoided.

Other than trade war, worry on recession possibility was escalated in 2019 after some countries experienced negative economic growth. To deal with this, one of the initiatives taken was monetary easing, such as interest rate cut. This move has successfully prevented further slump in the economic growth. US has cut their Fed rate 3 times from 2,50% to 1,75%, while Indonesia Central Bank has cut the 7-Day Repo Rate 4 times (100bps) from 6,00% to 5,00%.

From domestic, Indonesia Presidential election has increased the uncertainty due to the escalated political issues. However, in the end the situation has turned conducive with a happy ending.

How is the performance of Indonesia equity market in 2019?

JCI index in year 2019 was opened at 6,197 and closed at 6,299 with an increase of +1.70% during the year. Other equity index performance in 2019 were LQ45 +3.23%, IDX30 +2.42%, Sri Kehati +5.78%.

Sectoral index with highest performance were Financials (+15.20%) and Basic Industry (14.40%) while sectoral index with lowest performance were Consumer (-20.10%) and Mining (-12.80%).

One of the reasons of lowest performance of consumer sector is due to the increase in cigarette excise of up to 35%, where this has given negative sentiment for consumer sector. As such, related stock H.M. Sampoerna (HMSP) and Gudang Garam (GGRM) have the deepest slump during 2019 with negative performance of -43% and -36% respectively. These stocks have dragged down JCI performance in 2019 although banking stocks, such as BCA Bank (BBCA) and BRI Bank (BBRI) have performed well with positive performance of +28.6% and +20% during the year respectively.

 

Equity Fund with highest 1-year performance in Moduit:

Mutual Fund Name1-year performance based on NAV as of 30 December 2019
TRIM Syariah Saham+8,91%
Batavia Dana Saham Syariah+4,06%
RHB Sri-Kehati Index Fund+3,91%

 

How is the performance of Indonesia bonds market in 2019?

Bonds market has recorded a better performance during the year if compared with equity market, with BINDO (bonds market index) increase of 14.40%. The positive performance was supported by ratings upgrade from BBB- to BBB by rating agency Standard & Poor (S&P). Aside from this, interest rate cut by Central Bank of Indonesia for 4 times (100bps) in 2019 has become positive catalyst for Indonesia bonds market in 2019. Theoretically, bonds price has negative correlation with interest rate. This means bonds price most likely will increase when interest rate is cut and hence the profit from bonds could be obtained from coupon and price increase.

 

Fixed Income Fund with highest 1-year performance in Moduit:

Mutual Fund Name1-year performance based on NAV as of 30 December 2019
Danareksa Melati Pendapatan Utama+16,84%
Manulife Obligasi Negara Indonesia II+13,24%
RHB Fixed Income Fund 2+12,70%

 

 

Balanced Fund with highest 1-year performance in Moduit:

Mutual Fund Name1-year performance based on NAV as of 30 December 2019
Trimegah Syariah Berimbang+12,43%
Batavia Dana Dinamis+5,96%
Premier Campuran Fleksibel+5,88%

 

How is the performance of Indonesia money market in 2019?

Money market in 2019 has been quite stable. Although interest rate of time deposit has decreased, money market fund has been able to give higher return if compared to time deposit in big banks.

 

Money Market Fund with highest 1-year performance in Moduit:

Mutual Fund Name1-year performance based on NAV as of 30 December 2019
Pinnacle Money Market Fund+6,74%
BNI-AM Dana Likuid+6,68%
Principal Cash Fund+6,53%

  

What about 2020?

Entering 2020, there are optimism for the market. Manufacturing index in few large countries, such as US, China and Indonesia have shown improvements. Although the uncertainties from US and China trade war may still persist, the expectation of gradual trade war agreement will be key that will provide positive sentiment to the market. Aside from that, economic policy measure from Central Banks of large countries to support the slow down in global economic growth.

From domestic, we see the initiatives of building infrastructure and increase in human resources will be government main focus. Omnibus Law, which will focus on employment and tax policy that is planned to be implemented in 2020, is expected to bring positive impact to Indonesia economic growth.

Moreover, government initiative to increase the usage of B30 for diesel is also expected to help reduce oil and gas imports and absorb CPO yields which experienced export constraints to Europe last year. This is expected to help reduce current account deficit that has become the main concern of the government.

We see there is room for Central Bank of Indonesia to cut interest rate by 2 times (50 bps) in 2020 if the inflation is maintained stable below 4.00%, also supported by stable or strengthening Rupiah. This could become positive catalyst for bonds market. With 10-year IDR government bonds yield of 7.07% currently, we forecast Mutual Fund with higher portion in government/ corporation bonds with medium duration could still give return of 7.00-9.00% in 2020.

Company’s earnings growth is also forecasted to be at 8.00%-10.00% level in 2020, with expected economic growth of 5.00%-5.10%. Hence, we forecast JCI target to be within 6,800-6,930 range in 2020. As such, investors could manage their portfolio by investing in equity fund with index and conventional/Syariah based.

Perform evaluation on your portfolio periodically in accordance to each individual’s risk profiles with the help of Moduit Navigator feature in Moduit application, which is always ready to help your financial planning goal.

So, what are you waiting for? Let’s invest now in Moduit.

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