Nomura says Indonesia’s fundamentals are solid. Growth is strong, inflation is muted, and the central bank aims to keep the rupiah stable. And the government aims to kick-start infrastructure projects by making land acquisition easier.
So GDP growth is expected to grow from an estimated 5.9% this year to 7% next year. Nomura sees a 15 times PE for the equity market next year, with a possible re-rating to as much as 16.5 times PE.
The firm’s top stock picks in Indonesia are infrastructure providers. Commodity companies are also expected to do well. Coal prices are rising even as production volumes improve. A return to normal weather conditions will also boost volumes for palm oil companies, which too have seen selling prices increase of late. “That will basically be a return to production growth to above 10 per cent in 2011, and that will be the higher commodity price – 30 per cent higher for palm oil about 12 per cent higher in terms of coal.”
BTW, remember a Rothschild is doing a big coal deal in Indonesia. To summarise, Nathaniel Rothschild’s mining investment vehicle Vallar has struck a deal with Indonesia’s powerful Bakrie family to form an Asian coal powerhouse that could become one of the biggest players in the global energy industry. In return, the Bakries get a listing on the London Stock Exchange, continued control of their coal assets, and a very useful connection. The Rothschilds have been here before — at the beginning of the 20th century, they financed the development of the Baku oilfiels in what was then Russia, today Azerbaijan.