High-flying Indonesian market to rise again
Asia's best-performing stock market this year, Indonesia, is now seeing a string of upgrades in corporate earnings forecasts that could give the rally further momentum and cement its lead in the region.
Jakarta's stock market is basking in the quick turnaround the economy made from last year's currency crisis, helped by a rise in interest rates and an improvement in the country's trade deficit. The index has risen 17.5pc in dollar terms so far in 2014, with the rupiah's rally contributing to those gains.
Analysts are counting on other factors to drive the market up by a further 10pc to 15pc. Indonesia has presidential elections in April, and the market has historically rallied after elections.
Besides, domestic demand is strong and companies catering to the Indonesian middle class are seeing a jump in earnings.
"Once people could see that Indonesia's macro was improving faster than the other countries that are perceived to be risky, then Indonesia's risk premium vanished pretty quickly," said Jahanzeb Naseer, research analyst at Credit Suisse in Jakarta.
"From here on, what will differentiate Indonesia is that it is probably starting an upcycle in earnings. That tends to be a much more sustained period of recovery for markets." (Reuters)