Chief Economist & Political Strategist, CrossASEAN Research

Prasenjit K. Basu

Chief Economist & Political Strategist

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Macroeconomics

<ul>
<li>With the IDR stabilizing and inflation abating to 2.5%YoY in Jun'24, we expect a 25bp cut in the policy rate in the Jul-Sep'24 quarter. This should bolster hitherto-weak private consumption. </li>
<li>The fiscal deficit was a modest 2.2% of GDP in Apr'23-Mar'24; 'Prabowo risk' won't be manifest until 2025. Until then, liquid banks (L-D ratio 86.5%) are well-positioned to drive growth. </li>
<li>At 11.75x, the equity market's trailing P/E ratio is far below its 20-year mean of 16.16x. Given the stable macro backdrop, we recommend going Overweight Indonesian equities. </li>
</ul>


With the IDR stabilizing and inflation abating to 2.5%YoY in Jun'24, we expect a 25bp cut in the policy rate in the Jul-Sep'24 quarter. This should bolster hitherto-weak private consumption. 
The fiscal deficit was a modest 2.2% of GDP in Apr'23-Mar'24; 'Prabowo risk' won't be manifest until 2025. Until then, liquid banks (L-D ratio 86.5%) are well-positioned to drive growth. 
At 11.75x, the equity market's trailing P/E ratio is far below its 20-year mean of 16.16x. Given the stable macro backdrop, we recommend going Overweight Indonesian equities. 


Indonesia: Macro Stability and Attractive Valuations Create a Buying Opportunity

<ul>
<li>Although the fiscal deficit declined to 1.6% of GDP in 2023, markets are pricing in risks arising from President-elect Prabowo's possible resort to fiscal profligacy in pursuit of 8% growth. </li>
<li>More tangibly, with exports declining 7.5%YoY and imports up 1.1%YoY in Q1CY24, the trade surplus shrank to US$7.3bn (from Q1CY23's US$12.11bn), likely widening the CAD (from Q4CY23's 0.4% of GDP).   </li>
<li>With IDR depreciating 9.3%YoY, BI hiked its policy rate by 25bp last week to pre-empt imported inflation. Another rate hike is likely before Oct'24, so we would Underweight Indonesia. </li>
</ul>


Although the fiscal deficit declined to 1.6% of GDP in 2023, markets are pricing in risks arising from President-elect Prabowo's possible resort to fiscal profligacy in pursuit of 8% growth. 
More tangibly, with exports declining 7.5%YoY and imports up 1.1%YoY in Q1CY24, the trade surplus shrank to US$7.3bn (from Q1CY23's US$12.11bn), likely widening the CAD (from Q4CY23's 0.4% of GDP).   
With IDR depreciating 9.3%YoY, BI hiked its policy rate by 25bp last week to pre-empt imported inflation. Another rate hike is likely before Oct'24, so we would Underweight Indonesia. 


Indonesia: Prabowo Risk Beginning to Hurt IDR, Requiring Tighter Money

Cross Asset Strategy

<ul>
<li>Prabowo, a controversial ex-general accused of human rights abuses in Jakarta and East Timor during Suharto's era, looks likely to win the presidential election, with Jokowi's son Gibran as running-mate. </li>
<li>Gibran's presence has shifted the parliamentary polls by 10pp in favour of Prabowo's party, Gerindra, likely making it the largest at the expense of PDI-P-- winner of all previous elections.</li>
<li>Post-Oct'24, policy is likely to become more mercurial, fiscally imprudent, growth- and inflation-oriented. Markets are likely to be turbulent after initial celebration of a decisive outcome. We urge caution. </li>
</ul>


Prabowo, a controversial ex-general accused of human rights abuses in Jakarta and East Timor during Suharto's era, looks likely to win the presidential election, with Jokowi's son Gibran as running-mate. 
Gibran's presence has shifted the parliamentary polls by 10pp in favour of Prabowo's party, Gerindra, likely making it the largest at the expense of PDI-P-- winner of all previous elections.
Post-Oct'24, policy is likely to become more mercurial, fiscally imprudent, growth- and inflation-oriented. Markets are likely to be turbulent after initial celebration of a decisive outcome. We urge caution. 


Elections Likely to Hand a Decisive Mandate to Strongman Prabowo

<ul>
<li>With a positive real policy rate of +2.23% and 3.5% appreciation of IDR ytd, BI was comfortably able to keep its policy rate unchanged despite this week's US rate hike.  </li>
<li>Despite the commodity price correction, Indonesia will likely post a 2023 current account surplus of 0.2% of GDP; its fiscal deficit was 1.6% of GDP in the latest 12 months. </li>
<li>The equity market is trading at a trailing P/E of 14.7x, marginally below its 30-year mean. With RGDP of 5% in 2023 and 5.5% in 2024, we recommend being Overweight. </li>
</ul>


With a positive real policy rate of +2.23% and 3.5% appreciation of IDR ytd, BI was comfortably able to keep its policy rate unchanged despite this week's US rate hike.  
Despite the commodity price correction, Indonesia will likely post a 2023 current account surplus of 0.2% of GDP; its fiscal deficit was 1.6% of GDP in the latest 12 months. 
The equity market is trading at a trailing P/E of 14.7x, marginally below its 30-year mean. With RGDP of 5% in 2023 and 5.5% in 2024, we recommend being Overweight. 


Indonesia: Attractively Valued Amid Good Growth with Low Inflation and CA Surplus

Derivatives and Quantitative Strategist

Gaudenz Schneider

Event-Driven

<ul>
<li>Central banks globally are making rate decisions, with the Fed holding steady while Sweden, Switzerland, Taiwan, and the UK announce their decisions today.</li>
<li>Mexico and Canada are central banks to watch, with Fitch forecasting both economies to enter recession in 2025 due to their high US trade exposure.</li>
<li>The US's global reciprocal tariffs, set to be revealed on April 2, have significant implications for the global economy, with the potential to influence central bank policies worldwide.</li>
</ul>


Central banks globally are making rate decisions, with the Fed holding steady while Sweden, Switzerland, Taiwan, and the UK announce their decisions today.
Mexico and Canada are central banks to watch, with Fitch forecasting both economies to enter recession in 2025 due to their high US trade exposure.
The US's global reciprocal tariffs, set to be revealed on April 2, have significant implications for the global economy, with the potential to influence central bank policies worldwide.


Central Banks Hold Steady Amid Global Economic Uncertainty

Indonesia

iShares MSCI Indonesia ETF is an exchange-traded fund incorporated in the USA. The ETF seeks investment results that correspond to the performance of the MSCI Indonesia Investable Market Index.

iShares MSCI Indonesia ETF (EIDO US)

Indonesia: Macro Stability and Attractive Valuations Create a Buying Opportunity

Equity valuations (11.75x trailing PER) are attractive (vs 20yr mean of 16.2x). Shrinking CAD helps stabilize IDR, likely allowing a rate cut this...

Prasenjit K. Basu

Indonesia: Prabowo Risk Beginning to Hurt IDR, Requiring Tighter Money

Despite a smaller fiscal deficit (1.6% of GDP) in 2023, markets are pricing in "Prabowo risk". The switch to a current account deficit will...

Prasenjit K. Basu

Elections Likely to Hand a Decisive Mandate to Strongman Prabowo

Controversial ex-general Prabowo is poised to win the presidential election with Jokowi's son as his running-mate, potentially leading to unstable...

Prasenjit K. Basu

Indonesia: Attractively Valued Amid Good Growth with Low Inflation and CA Surplus

With a real policy rate of +2.23% & 3.5% IDR appreciation ytd, BI saw no need to match the US rate hike. Solid 5%+ RGDP growth with a CA surplus...

Prasenjit K. Basu

Central Banks Hold Steady Amid Global Economic Uncertainty

Reminder. China Mobile (941 HK) will release 2024 results tonight at 19:00h (HK time) and announce their dividend. Large volume traded yesterday in...

Gaudenz Schneider

Indonesia: Macro Stability and Attractive Valuations Create a Buying Opportunity

Equity valuations (11.75x trailing PER) are attractive (vs 20yr mean of 16.2x). Shrinking CAD helps stabilize IDR, likely allowing a rate cut this...

Prasenjit K. Basu

Indonesia: Prabowo Risk Beginning to Hurt IDR, Requiring Tighter Money

Despite a smaller fiscal deficit (1.6% of GDP) in 2023, markets are pricing in "Prabowo risk". The switch to a current account deficit will...

Prasenjit K. Basu

Elections Likely to Hand a Decisive Mandate to Strongman Prabowo

​Controversial ex-general Prabowo is poised to win the presidential election with Jokowi's son as his running-mate, potentially leading to unstable...

Prasenjit K. Basu

Indonesia: Attractively Valued Amid Good Growth with Low Inflation and CA Surplus

With a real policy rate of +2.23% & 3.5% IDR appreciation ytd, BI saw no need to match the US rate hike. Solid 5%+ RGDP growth with a CA surplus...

Prasenjit K. Basu

Central Banks Hold Steady Amid Global Economic Uncertainty

Reminder. China Mobile (941 HK) will release 2024 results tonight at 19:00h (HK time) and announce their dividend. Large volume traded yesterday in...

Gaudenz Schneider

Controversial ex-general Prabowo is poised to win the presidential election with Jokowi's son as his running-mate, potentially leading to unstable...