Indonesia’s journey towards an energy transition, particularly with the adoption of electric vehicles (EVs), has been met with a fair share of skepticism. Concerns about the availability of charging stations, the cost-efficiency of EVs, and the overall practicality of long-distance travel in an EV have loomed large. However, our recent road round trip from Jakarta to Semarang which is around 400km one way pleasantly surprised us, casting away many of those doubts. Here’s a recount of our electrifying adventure that proved the naysayers wrong. 


Charging stations aplenty from Jakarta to Semarang 

Bird eye view of several charging stations by the National Electric Company along the toll roads  

Starting at 5:30am from our office with a fully charged battery and a sense of adventure, we were ready to begin. Mind you, this was our first time taking our EV, a Hyundai Ioniq 5, to a trip this far and long so we were cautiously optimistic. Leaving at the break of dawn has its perks namely avoiding the notorious Jakarta traffic jam. Whizzing past several rest areas, we were able to spot almost if not all had the electric sign logos on their billboards showing EV charging station availability. Fortune was on our side.   

With rest areas aplenty by the toll roads, our first leg of the journey took us to the midpoint at the KM 228A rest area. We covered 243 km in under 3 hours at 80-110 km/h with a battery life of 50% remaining. Upon first glance, the charging stations were clear to locate and readily available with no lines. We charged 35,77 kWh for Rp 96,000 in just 54 minutes – the perfect amount of time for a leisurely breakfast.  


Jakarta to our first charging station rest area 

Location: SPKLU KM 228A rest area 


By 10am, we were back on the road and reached Semarang by 12pm. This leg of the trip covered 201 km and took around 2 hours and 14 minutes. Traffic thinned out at this point and we were able to speed up to 140 km/h in the hot weather, leaving the battery at 41%.  

Our next pit stop was at the PLN office in Semarang, where we juiced up 47,80 kWh for Rp 130,000 in 59 minutes. This charging station went above and beyond with its offerings including a lounge with full air conditioning, television, lounge chairs, and a coffee vending machine. With free amenities such as these, road tripping has never felt so easy.  


Luxury at its finest in an EV charging station out of all places 

Location: SPKLU PLN UID Central Java & DIY 


All recharged both body and vehicle, we headed to the Padma Hotel to situate for the night. When parking, the hotel lot itself offered 2-3 AC type charging stations and several other EV cars were also at the ready to charge. It appears that EV cars are continuing to grow its interest even all the way in Semarang.  

We spent the next day exploring the city. For readers who have never been, Semarang is the capital and largest city of Central Java, rich with history of being a major port during the Dutch colonial era. Walking around Old Town, well-preserved Dutch colonial buildings and antique shops lined the streets transporting you back in time. Its historical port has made Semarang to be a melting pot of Chinese, Indian Arab, and European culture as well, lending an abundant variety of charm and heritage on every street corner.


Gorgeous historical charm of Semarang

Photo credits: IG @sutanto.harsono and Wuddy Warsono


We headed to the city center for lunch and were greeted with a plethora of delicious local cuisine at the D’Kambodja Heritage restaurant. With its location being a cultural heritage building, we found that the interior blended Indonesian Dutch Chinese architecture lended a refreshing revitalized modern twist. Javanese ornaments and colorful flowers dripped from the ceiling, bringing a vibrant atmosphere to complement the “buffet style” of local dishes that will leave your mouth watering.  


A feast of colors for the eyes and stomach  

The D’Kambodja Heritage restaurant was opened by Anne Avantie, famed fashion designer who modernized the kebaya (traditional Indonesian long sleeve garment). 


Our hunger for local eats and thirst for history appeased, we headed to meet with local businesses. Having spoken with those in various sectors, we found that businesses in Central Java is thriving. This is largely due to the relocations of many factories from West Java into the central region, driven mainly from a desire to capitalize on the region’s lower wages. We had the opportunity to also visit the Grand Batang City, the new industrial park for infrastructure development. Although the area is still under construction, the potential for growth is evident. Tangible growth can be seen in Central Java through these new businesses and initiatives, promising an exciting economic boom.  

It was with this exciting sentiment that we made our way to one last charging station before starting our journey back to Jakarta. This rest area costing Rp 95,000 for 34.5 kWh and took 53 minutes to fully charge. Once again, easy to find and locate with no lines to wait behind. The premises themselves are clean and charging features easy to navigate ourselves. 


Laying the groundwork: new industrial structures in the making 

First picture: Alderon Factory (IMPC group) 

Second and third picture: ongoing structures being built 


 It was with this exciting sentiment that we made our way to one last charging station before starting our journey back to Jakarta. This rest area costing Rp 95,000 for 34.5 kWh and took 53 minutes to fully charge. Once again, easy to find and locate with no lines to wait behind. The premises themselves are clean and charging features easy to navigate ourselves. 


Our last pit stop before heading back home 

Location: SPKLU KM 360 B Toll Batang – Semarang rest area 


The total trip from Jakarta to Semarang and back roughly covered 900 km, which only needed 3 pit stops to charge the car and were a breeze to locate. At an average cost of Rp 2,727 per kWh, we spent a total of Rp 321,966 to and back. Compared to a gas car, we estimate it would have roughly costed around a whopping Rp 1,106,250 for the same distance. Our wallets were crying in relief. 


Electric cars are a win for your wallet  


Semarang offered convenient charging options, including the Padma Hotel’s AC stations and numerous AC and DC stations along the toll roads. We counted around 9-10 EV charging stations between Jakarta and Semarang, none of which were crowded. Should EV interest surge, we do think there would be a growing need for more charging stations. This trip is also a testament proving that EVs are not only cost-effective but also comparable in travel time to gasoline cars. EVs are not only kind to the planet but also to the pocket, matching gasoline cars in travel time while delivering significant savings. With this electrifying adventure, the future of travel is bright, efficient, and definitely more affordable.  

Drive electric, save green: both the planet and your wallet will thank you! 

Tara Mulia 


Share

Indonesia’s journey towards an energy transition, particularly with the adoption of electric vehicles (EVs), has been met with a fair share of skepticism. Concerns about the availability of charging stations, the cost-efficiency of EVs, and the overall practicality of long-distance travel in an EV have loomed large. However, our recent road round trip from Jakarta to Semarang which is around 400km one way pleasantly surprised us, casting away many of those doubts. Here’s a recount of our electrifying adventure that proved the naysayers wrong. 


Charging stations aplenty from Jakarta to Semarang 

Bird eye view of several charging stations by the National Electric Company along the toll roads  

Starting at 5:30am from our office with a fully charged battery and a sense of adventure, we were ready to begin. Mind you, this was our first time taking our EV, a Hyundai Ioniq 5, to a trip this far and long so we were cautiously optimistic. Leaving at the break of dawn has its perks namely avoiding the notorious Jakarta traffic jam. Whizzing past several rest areas, we were able to spot almost if not all had the electric sign logos on their billboards showing EV charging station availability. Fortune was on our side.   

With rest areas aplenty by the toll roads, our first leg of the journey took us to the midpoint at the KM 228A rest area. We covered 243 km in under 3 hours at 80-110 km/h with a battery life of 50% remaining. Upon first glance, the charging stations were clear to locate and readily available with no lines. We charged 35,77 kWh for Rp 96,000 in just 54 minutes – the perfect amount of time for a leisurely breakfast.  


Jakarta to our first charging station rest area 

Location: SPKLU KM 228A rest area 


By 10am, we were back on the road and reached Semarang by 12pm. This leg of the trip covered 201 km and took around 2 hours and 14 minutes. Traffic thinned out at this point and we were able to speed up to 140 km/h in the hot weather, leaving the battery at 41%.  

Our next pit stop was at the PLN office in Semarang, where we juiced up 47,80 kWh for Rp 130,000 in 59 minutes. This charging station went above and beyond with its offerings including a lounge with full air conditioning, television, lounge chairs, and a coffee vending machine. With free amenities such as these, road tripping has never felt so easy.  


Luxury at its finest in an EV charging station out of all places 

Location: SPKLU PLN UID Central Java & DIY 


All recharged both body and vehicle, we headed to the Padma Hotel to situate for the night. When parking, the hotel lot itself offered 2-3 AC type charging stations and several other EV cars were also at the ready to charge. It appears that EV cars are continuing to grow its interest even all the way in Semarang.  

We spent the next day exploring the city. For readers who have never been, Semarang is the capital and largest city of Central Java, rich with history of being a major port during the Dutch colonial era. Walking around Old Town, well-preserved Dutch colonial buildings and antique shops lined the streets transporting you back in time. Its historical port has made Semarang to be a melting pot of Chinese, Indian Arab, and European culture as well, lending an abundant variety of charm and heritage on every street corner.


Gorgeous historical charm of Semarang

Photo credits: IG @sutanto.harsono and Wuddy Warsono


We headed to the city center for lunch and were greeted with a plethora of delicious local cuisine at the D’Kambodja Heritage restaurant. With its location being a cultural heritage building, we found that the interior blended Indonesian Dutch Chinese architecture lended a refreshing revitalized modern twist. Javanese ornaments and colorful flowers dripped from the ceiling, bringing a vibrant atmosphere to complement the “buffet style” of local dishes that will leave your mouth watering.  


A feast of colors for the eyes and stomach  

The D’Kambodja Heritage restaurant was opened by Anne Avantie, famed fashion designer who modernized the kebaya (traditional Indonesian long sleeve garment). 


Our hunger for local eats and thirst for history appeased, we headed to meet with local businesses. Having spoken with those in various sectors, we found that businesses in Central Java is thriving. This is largely due to the relocations of many factories from West Java into the central region, driven mainly from a desire to capitalize on the region’s lower wages. We had the opportunity to also visit the Grand Batang City, the new industrial park for infrastructure development. Although the area is still under construction, the potential for growth is evident. Tangible growth can be seen in Central Java through these new businesses and initiatives, promising an exciting economic boom.  

It was with this exciting sentiment that we made our way to one last charging station before starting our journey back to Jakarta. This rest area costing Rp 95,000 for 34.5 kWh and took 53 minutes to fully charge. Once again, easy to find and locate with no lines to wait behind. The premises themselves are clean and charging features easy to navigate ourselves. 


Laying the groundwork: new industrial structures in the making 

First picture: Alderon Factory (IMPC group) 

Second and third picture: ongoing structures being built 


 It was with this exciting sentiment that we made our way to one last charging station before starting our journey back to Jakarta. This rest area costing Rp 95,000 for 34.5 kWh and took 53 minutes to fully charge. Once again, easy to find and locate with no lines to wait behind. The premises themselves are clean and charging features easy to navigate ourselves. 


Our last pit stop before heading back home 

Location: SPKLU KM 360 B Toll Batang – Semarang rest area 


The total trip from Jakarta to Semarang and back roughly covered 900 km, which only needed 3 pit stops to charge the car and were a breeze to locate. At an average cost of Rp 2,727 per kWh, we spent a total of Rp 321,966 to and back. Compared to a gas car, we estimate it would have roughly costed around a whopping Rp 1,106,250 for the same distance. Our wallets were crying in relief. 


Electric cars are a win for your wallet  


Semarang offered convenient charging options, including the Padma Hotel’s AC stations and numerous AC and DC stations along the toll roads. We counted around 9-10 EV charging stations between Jakarta and Semarang, none of which were crowded. Should EV interest surge, we do think there would be a growing need for more charging stations. This trip is also a testament proving that EVs are not only cost-effective but also comparable in travel time to gasoline cars. EVs are not only kind to the planet but also to the pocket, matching gasoline cars in travel time while delivering significant savings. With this electrifying adventure, the future of travel is bright, efficient, and definitely more affordable.  

Drive electric, save green: both the planet and your wallet will thank you! 

Tara Mulia 


Share

“Investing in EMs in the past decade is like preparing for a firework show that ends with a single sparkler—underwhelming and disappointing.”

We’re all familiar with the conversations above, albeit in different forms. Just mention “EM (Emerging Market) equity” at a cocktail party, and you’ll see people quickly finishing their drinks and changing the subject to US market investing. Could this be a classic example of Peter Lynch’s cocktail party theory, indicating that the market is bottoming out?


Beyond the liquor
In “One Up on Wall Street,” Peter Lynch identified cocktail party conversations as a significant contrarian market indicator. When people avoid discussing certain investments, it’s often a sign that the market is bottoming, presenting an opportunity to find undervalued stocks. Conversely, when such gatherings are filled with investment tips and general euphoria, it typically signals that the market is peaking and a downturn may be imminent.


The following table below showcases why people have been quickly jumping to avoid topics linked to anything with EM investing.

Discussing EM equity returns in the past decade is a conversation-stopper

Equity returns and currencies performance of EM between 2013 to Q1 2024

Note: The equity market return of each country is represented by its respective MSCI country index, rounded.

Source: Bloomberg

EM equity returns over the past decade have indeed been dismal, particularly in USD terms. Of the 23 emerging markets tracked by MSCI, fifteen recorded positive returns in local currency terms. However, only six recorded positive returns when local currency depreciation is taken into account.

Focusing on our Southeast Asia market, none have been positive in USD terms. It’s no wonder it feels like a rollercoaster that has never left the ground.

Take Indonesia, for instance: Indonesian equities, as represented by MSCI Indonesia, achieved a cumulative return of 50 percent over the past decade. However, when we consider the 39 percent depreciation of the Rupiah during this period, the return plunged to a negative 9 percent.

Another perspective, as illustrated in the table below, is that no less than 22 percent of Indonesian stocks are currently trading at or below IDR 50, which used to be the floor price until recent changes. This represents a record high, more than three times the figures seen during the COVID era. To make matters worse, trading volume has significantly decreased. Public expectations for future returns from equity investing are very low or nonexistent.

Penny stocks make up a fifth of Indonesian stocks

# of stocks traded at Rp 50 per share, the lowest possible price in JCI

Source: Bloomberg

Moving on to the real sectors, the situation is not any better. Key economic indicators of middle-class prosperity, such as auto sales, have been going nowhere for the past 14 years since 2010, despite a 39.4% GDP per capita growth. Are things really that bad? Yes, they are.

Jakarta Composite Index (“JCI”) in USD echoes coincidence indicators

Indonesia 4W car sales, imports, and cement sales are flat

Source: Bloomberg, Gaikindo (Ministry of Industry)

Oddly enough, the number of years it takes to afford the go to car on minimum wage has decreased. What is missing here?

Note: Annualized average minimum wage in Indonesia divided by Toyota Avanza1.3 E M/T car price of the respective year 

Source: Auto2000, Kemnaker (Ministry of Manpower).

Stockbrokers, struggling with the decreasing revenue pool, have hoped on prophecies of rate cuts. The only difference in their forecasts was which month the rate cuts were going to be delivered. We know what happened next. Until today, the coaster is still stuck on the ground and the greenback has been mighty. This has been weighing down on the EM equities.

Rate cut expectation fades?

The Fed futures rate (%) and effective fund rate

Source: Bloomberg

High interest rates draws back capital back to the US

Cumulative foreign net inflow of US portfolio (US$ Bn, since 2005) vs. Fed Fund Rate

Source: Bloomberg

In order for EMs to start performing, the prayer list includes: (1) tamed inflation, (2) recession, and (3) rate cuts as a result of the previous two. Some of these prayers are materializing, but not yet fully granted.

Moderating  inflation and weak US economics are precursors for rate cuts

Real GDP growth (YoY)  stagnated in Europe, slowed in the US, and was modest in China

CPI inflation (%, YoY) moderating into a new higher-normal

Source: Bloomberg

With all the negativity, it’s easy to fall into the gloom and doom camp about everything. However, much like a dense forest where sunlight occasionally breaks through the canopy, pockets of strength can still be found outside the US market. These bright spots offer hope and opportunity, reminding us that even amidst widespread challenges, there are areas where growth and resilience continue to thrive.

Now imagine a flat bowl balanced on a bamboo tower, filled with water. If everything were static, the water would overflow equally everywhere. But the market isn’t static; it’s a wild circus with elephants (market players) pushing the bowl, spilling water mostly where they prefer, leaving other places dry.

Some get the flow, Some do not

Similarly in emerging markets, some regions are left parched, while others are flourishing with liquidity. Take Argentina, for example. Thanks to radical changes like a smaller government and dollarization, its stock market is bubbling up nicely.

Sure, some might say Argentina’s market is just a tiny puddle in the vast ocean of global capital, with only a USD 53 billion market size. But this goes to show that even in a topsy-turvy market, there are still pockets of opportunity.

So, is it just a periphery market phenomenon in the EM space? We think not. Enter India.

Modi’s administration introduced game-changing economic reforms that transformed India into one of the world’s leading economies. In this case, the game changers are: (1) pro-investment policies and (2) savvy and effective approach to attract Western investments averting from China.

Indonesia’s trade surplus with India – potential commodity supercycle is on the horizon

India GDP (left), in bn USD. Indonesia – India trade balance (right). In USD bn

Source: Bloomberg, Government of Indonesia

Currently, India’s per capita income stands at a modest USD 2,400. However, using the rule of 72, we can make an optimistic projection. Assuming a 6% GDP per capita growth year over year, Indians will be twice as rich in just 12 years.

When incomes rise, consumption patterns change. The first things people tend to buy with their newfound wealth are goods. And when we talk about goods, we’re talking about commodities—lots of them. Increased demand for commodities translates into a thriving market for producers and exporters. Enter Indonesia, which happens to be rich in natural resources and commodities.

Indonesia stands to gain significantly from this economic evolution in India. With its vast reserves of minerals, agricultural products, and energy resources, Indonesia is perfectly positioned to supply the growing Indian appetite for commodities. As India’s middle class expands and consumption increases, Indonesian exports to India are likely to surge, benefiting both economies.

So, while India’s per capita income growth signals a brighter future for its citizens, it also opens up lucrative opportunities for Indonesia. This symbiotic relationship highlights the interconnected nature of global economies, where the prosperity of one nation can ripple out to benefit others.

Still on the subject of Indonesia, recent negative headlines have highlighted the potential for public debt to GDP to reach 50% from the current 39%. Simple arithmetic suggests that this reported figure does not add up.

Leveraging up to 50% would entail significant ramifications, including: (1) interest expenses to revenue reaching 30%, worse than Bangladesh, (2) implying a fiscal deficit of over 5%, well above the 3% limit stipulated by current law, (3) changing this law being improbable given the current parliamentary composition, (4) a significant sovereign downgrade, problematic given that the capital and current account remain negative, and (5) the crowding-out effect, where higher interest rates and an influx of government bonds discourage private sector investments.

All of the above does not seem to be a sensible move for the new Indonesian government.

Case in point: finding Pocket of performance in Indonesia

Most investors are already familiar with the success stories of Indonesia’s big four banks. However, despite the prevalent bearish sentiment in the small to mid-cap space in Indonesia, there are noteworthy fast-growing companies in this category. These companies often fly under the radar of many investors, yet they offer significant growth potential. Bisi International (BISI IJ) and Impack Pratama (IMPC IJ) are prime examples of such hidden gems. BISI IJ is a major player in agricultural solutions, providing a wide range of products and services to enhance agricultural productivity. IMPC IJ specializes in alternative building materials, offering innovative and sustainable solutions for construction projects.

What sets these companies apart is their exceptional execution in relatively niche markets that are typically unappealing to larger conglomerates. BISI IJ excels in its specialized agricultural market, leveraging its expertise to drive growth and innovation. Similarly, IMPC IJ focuses on alternative building materials, a sector often overlooked by bigger players. This focus allows both companies to carve out strong market positions and achieve impressive growth rates. Their success stories underscore the potential that exists in Indonesia’s small to mid-cap space, offering investors attractive opportunities beyond the well-known large-cap stocks.

There are gems in muddy water

CAGR (%) on TTM EPS in USD (2014-2024)

CAGR (%) on Total Net Return with Dividends in USD (2014-2024)

Source: Bloomberg

Another topic we have seen people turn away from in a cocktail party until very recently is precious metals. Gold and its poor cousin silver may seem like the dinosaurs of the investment world—static, unexciting, and about as useful as a paperweight in the digital age. It doesn’t generate dividends, won’t give you the thrill of tech stocks, and can sit there for ages without making a splash.

Here’s the kicker: investors should still keep an eye on it. Despite its old-school charm, precious metals have a knack for shining when things get rough. It’s the financial world’s version of a trusty old sweater, offering warmth and comfort when the economic weather turns chilly. So, while it might not be the flashiest asset in your portfolio, it’s definitely one asset class worth allocating into.


Time to rethink your holiday

Indonesia is breaking records, but it’s not for the hottest chili or longest dance marathon—it’s for
holidays, racking up a whopping 23 days off this year. Meanwhile, the US sticks to a lean average of 9
days. For investors, it’s been a rough ride in emerging markets, with US stocks often leaving Indonesian
ones eating dust. Interestingly in 2022, Indonesia’s Jakarta Composite Index (JCI) outshined the
S&P 500 with a dazzling 15% gain. Coincidentally, Indonesia only took 10 holidays that year, almost
mirroring the US. Could fewer holidays be the secret sauce for market success? Something to chew on
as we plan our next beach getaway!

Indonesia’s JCI outperformed S&P500 when its holidays were the lowest

Number of stock market holidays of the US vs Indonesia (in days)

Source: Bloomberg



Share

“Investing in EMs in the past decade is like preparing for a firework show that ends with a single sparkler—underwhelming and disappointing.”

We’re all familiar with the conversations above, albeit in different forms. Just mention “EM (Emerging Market) equity” at a cocktail party, and you’ll see people quickly finishing their drinks and changing the subject to US market investing. Could this be a classic example of Peter Lynch’s cocktail party theory, indicating that the market is bottoming out?


Beyond the liquor
In “One Up on Wall Street,” Peter Lynch identified cocktail party conversations as a significant contrarian market indicator. When people avoid discussing certain investments, it’s often a sign that the market is bottoming, presenting an opportunity to find undervalued stocks. Conversely, when such gatherings are filled with investment tips and general euphoria, it typically signals that the market is peaking and a downturn may be imminent.


The following table below showcases why people have been quickly jumping to avoid topics linked to anything with EM investing.

Discussing EM equity returns in the past decade is a conversation-stopper

Equity returns and currencies performance of EM between 2013 to Q1 2024

Note: The equity market return of each country is represented by its respective MSCI country index, rounded.

Source: Bloomberg

EM equity returns over the past decade have indeed been dismal, particularly in USD terms. Of the 23 emerging markets tracked by MSCI, fifteen recorded positive returns in local currency terms. However, only six recorded positive returns when local currency depreciation is taken into account.

Focusing on our Southeast Asia market, none have been positive in USD terms. It’s no wonder it feels like a rollercoaster that has never left the ground.

Take Indonesia, for instance: Indonesian equities, as represented by MSCI Indonesia, achieved a cumulative return of 50 percent over the past decade. However, when we consider the 39 percent depreciation of the Rupiah during this period, the return plunged to a negative 9 percent.

Another perspective, as illustrated in the table below, is that no less than 22 percent of Indonesian stocks are currently trading at or below IDR 50, which used to be the floor price until recent changes. This represents a record high, more than three times the figures seen during the COVID era. To make matters worse, trading volume has significantly decreased. Public expectations for future returns from equity investing are very low or nonexistent.

Penny stocks make up a fifth of Indonesian stocks

# of stocks traded at Rp 50 per share, the lowest possible price in JCI

Source: Bloomberg

Moving on to the real sectors, the situation is not any better. Key economic indicators of middle-class prosperity, such as auto sales, have been going nowhere for the past 14 years since 2010, despite a 39.4% GDP per capita growth. Are things really that bad? Yes, they are.

Jakarta Composite Index (“JCI”) in USD echoes coincidence indicators

Indonesia 4W car sales, imports, and cement sales are flat

Source: Bloomberg, Gaikindo (Ministry of Industry)

Oddly enough, the number of years it takes to afford the go to car on minimum wage has decreased. What is missing here?

Note: Annualized average minimum wage in Indonesia divided by Toyota Avanza1.3 E M/T car price of the respective year 

Source: Auto2000, Kemnaker (Ministry of Manpower).

Stockbrokers, struggling with the decreasing revenue pool, have hoped on prophecies of rate cuts. The only difference in their forecasts was which month the rate cuts were going to be delivered. We know what happened next. Until today, the coaster is still stuck on the ground and the greenback has been mighty. This has been weighing down on the EM equities.

Rate cut expectation fades?

The Fed futures rate (%) and effective fund rate

Source: Bloomberg

High interest rates draws back capital back to the US

Cumulative foreign net inflow of US portfolio (US$ Bn, since 2005) vs. Fed Fund Rate

Source: Bloomberg

In order for EMs to start performing, the prayer list includes: (1) tamed inflation, (2) recession, and (3) rate cuts as a result of the previous two. Some of these prayers are materializing, but not yet fully granted.

Moderating  inflation and weak US economics are precursors for rate cuts

Real GDP growth (YoY)  stagnated in Europe, slowed in the US, and was modest in China

CPI inflation (%, YoY) moderating into a new higher-normal

Source: Bloomberg

With all the negativity, it’s easy to fall into the gloom and doom camp about everything. However, much like a dense forest where sunlight occasionally breaks through the canopy, pockets of strength can still be found outside the US market. These bright spots offer hope and opportunity, reminding us that even amidst widespread challenges, there are areas where growth and resilience continue to thrive.

Now imagine a flat bowl balanced on a bamboo tower, filled with water. If everything were static, the water would overflow equally everywhere. But the market isn’t static; it’s a wild circus with elephants (market players) pushing the bowl, spilling water mostly where they prefer, leaving other places dry.

Some get the flow, Some do not

Similarly in emerging markets, some regions are left parched, while others are flourishing with liquidity. Take Argentina, for example. Thanks to radical changes like a smaller government and dollarization, its stock market is bubbling up nicely.

Sure, some might say Argentina’s market is just a tiny puddle in the vast ocean of global capital, with only a USD 53 billion market size. But this goes to show that even in a topsy-turvy market, there are still pockets of opportunity.

So, is it just a periphery market phenomenon in the EM space? We think not. Enter India.

Modi’s administration introduced game-changing economic reforms that transformed India into one of the world’s leading economies. In this case, the game changers are: (1) pro-investment policies and (2) savvy and effective approach to attract Western investments averting from China.

Indonesia’s trade surplus with India – potential commodity supercycle is on the horizon

India GDP (left), in bn USD. Indonesia – India trade balance (right). In USD bn

Source: Bloomberg, Government of Indonesia

Currently, India’s per capita income stands at a modest USD 2,400. However, using the rule of 72, we can make an optimistic projection. Assuming a 6% GDP per capita growth year over year, Indians will be twice as rich in just 12 years.

When incomes rise, consumption patterns change. The first things people tend to buy with their newfound wealth are goods. And when we talk about goods, we’re talking about commodities—lots of them. Increased demand for commodities translates into a thriving market for producers and exporters. Enter Indonesia, which happens to be rich in natural resources and commodities.

Indonesia stands to gain significantly from this economic evolution in India. With its vast reserves of minerals, agricultural products, and energy resources, Indonesia is perfectly positioned to supply the growing Indian appetite for commodities. As India’s middle class expands and consumption increases, Indonesian exports to India are likely to surge, benefiting both economies.

So, while India’s per capita income growth signals a brighter future for its citizens, it also opens up lucrative opportunities for Indonesia. This symbiotic relationship highlights the interconnected nature of global economies, where the prosperity of one nation can ripple out to benefit others.

Still on the subject of Indonesia, recent negative headlines have highlighted the potential for public debt to GDP to reach 50% from the current 39%. Simple arithmetic suggests that this reported figure does not add up.

Leveraging up to 50% would entail significant ramifications, including: (1) interest expenses to revenue reaching 30%, worse than Bangladesh, (2) implying a fiscal deficit of over 5%, well above the 3% limit stipulated by current law, (3) changing this law being improbable given the current parliamentary composition, (4) a significant sovereign downgrade, problematic given that the capital and current account remain negative, and (5) the crowding-out effect, where higher interest rates and an influx of government bonds discourage private sector investments.

All of the above does not seem to be a sensible move for the new Indonesian government.

Case in point: finding Pocket of performance in Indonesia

Most investors are already familiar with the success stories of Indonesia’s big four banks. However, despite the prevalent bearish sentiment in the small to mid-cap space in Indonesia, there are noteworthy fast-growing companies in this category. These companies often fly under the radar of many investors, yet they offer significant growth potential. Bisi International (BISI IJ) and Impack Pratama (IMPC IJ) are prime examples of such hidden gems. BISI IJ is a major player in agricultural solutions, providing a wide range of products and services to enhance agricultural productivity. IMPC IJ specializes in alternative building materials, offering innovative and sustainable solutions for construction projects.

What sets these companies apart is their exceptional execution in relatively niche markets that are typically unappealing to larger conglomerates. BISI IJ excels in its specialized agricultural market, leveraging its expertise to drive growth and innovation. Similarly, IMPC IJ focuses on alternative building materials, a sector often overlooked by bigger players. This focus allows both companies to carve out strong market positions and achieve impressive growth rates. Their success stories underscore the potential that exists in Indonesia’s small to mid-cap space, offering investors attractive opportunities beyond the well-known large-cap stocks.

There are gems in muddy water

CAGR (%) on TTM EPS in USD (2014-2024)

CAGR (%) on Total Net Return with Dividends in USD (2014-2024)

Source: Bloomberg

Another topic we have seen people turn away from in a cocktail party until very recently is precious metals. Gold and its poor cousin silver may seem like the dinosaurs of the investment world—static, unexciting, and about as useful as a paperweight in the digital age. It doesn’t generate dividends, won’t give you the thrill of tech stocks, and can sit there for ages without making a splash.

Here’s the kicker: investors should still keep an eye on it. Despite its old-school charm, precious metals have a knack for shining when things get rough. It’s the financial world’s version of a trusty old sweater, offering warmth and comfort when the economic weather turns chilly. So, while it might not be the flashiest asset in your portfolio, it’s definitely one asset class worth allocating into.


Time to rethink your holiday

Indonesia is breaking records, but it’s not for the hottest chili or longest dance marathon—it’s for
holidays, racking up a whopping 23 days off this year. Meanwhile, the US sticks to a lean average of 9
days. For investors, it’s been a rough ride in emerging markets, with US stocks often leaving Indonesian
ones eating dust. Interestingly in 2022, Indonesia’s Jakarta Composite Index (JCI) outshined the
S&P 500 with a dazzling 15% gain. Coincidentally, Indonesia only took 10 holidays that year, almost
mirroring the US. Could fewer holidays be the secret sauce for market success? Something to chew on
as we plan our next beach getaway!

Indonesia’s JCI outperformed S&P500 when its holidays were the lowest

Number of stock market holidays of the US vs Indonesia (in days)

Source: Bloomberg



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We drive our mission with an exceptional culture through applying a growth mindset where re-search.
re-learning and reflection is at our core.