Consumer-related stocks and producers of building materials are among the many winners from Indonesia’s 3,304.1 trillion rupiah ($216 billion) spending budget for the next year, according to analysts.
(Bloomberg) — Consumer-related stocks and producers of building materials are among the many winners from Indonesia’s 3,304.1 trillion rupiah ($216 billion) spending budget for the next year, according to analysts.
President Joko Widodo, who is stepping down in 2024, announced higher infrastructure spending of 422.7 trillion rupiah amid plans to move the nation’s capital to Borneo next year. The president, who still enjoys plenty of public support, also unveiled an 8% average increase in civil servants’ salaries to boost domestic consumption.
Those are part of the president’s annual budget speech to parliament on Wednesday, where he revealed targets to shrink the budget deficit, while forecasting a more moderate growth in the face of slowing global economy. Still, there are more winners than losers from the budget.
Read more: Jokowi Tempers Growth Outlook, Warns of Middle-Income Trap
“Higher government spending should create multiplier effect on consumer spending, benefiting consumer staples, banks and industrial estate developers, said Andrey Wijaya, head of research at RHB Sekuritas.
Here’s what analysts see as the main winners and losers:
WINNERS
- Consumer stocks, such as food manufacturer PT Indofood CBP Sukses Makmur and snacks maker PT Mayora Indah are among Wijaya’s top picks in the sector
- Producers of building materials will gain from increased infrastructure spending, while costs are lower amid declines in coal prices, said head of research at Mirae Asset Sekuritas Robertus Hardy. Cement maker PT Indocement Tunggal Prakarsa and state-owned PT Semen Indonesia are likely winners in the sector, said RHB’s Wijaya.
- Lenders, including PT Bank Rakyat Indonesia, PT Bank Negara Indonesia and PT Bank Syariah Indonesia are likely beneficiaries from Jokowi’s promise for improvement of investment financing at state-owned companies and larger financing access for low-income earners, small and ultra-micro businesses.
- Miners with downstream investments will continue to benefit from policies to support Indonesia’s move up the commodities value chain, while restricting exports of raw minerals, according to Andre Benas, head of research at BCA Sekuritas. His top pick is PT Trimegah Bangun Persada, which shipped its first nickel sulfate to China in June.
- Industrial estates developers PT AKR Corporindo and PT Surya Semesta Internusa will benefit from the government’s focus on the new capital, according to RHB’s Wijaya. Finance Minister Sri Mulyani Indrawati said Wednesday that as much as 40.6 trillion rupiah will be spent next year to build a new VVIP airport in Nusantara.
- Hospital operators such as PT Medikaloka Hermina and PT Mitra Keluarga Karyasehat could benefit from the higher health spending plan of 186.4 trillion rupiah, as well as Indonesia’s new healthcare law that offers advantage to private hospital managers, said Benas from BCA.
LOSERS
- Traditional tech giants such as GoTo Group and PT Bukalapak.com risk being sidelined amid increasing competition from the likes of TikTok Shop, and as investors ride the artificial intelligence hype, according to BCA’s Benas. In the budget, Jokowi promised to continue support for digital transformation projects and AI developments.
–With assistance from Abhishek Vishnoi.
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