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Stock Index
Bahana Securities

23 Jun 2018 | 07:19 WIB
INDEX
SCORE
POIN
%
COMPOSITE
6.067,087
52,268
0,869%
Last 1 day
IDX30
526,492
3,551
0,679%
Last 1 day
MBX
1.718,699
17,373
1,021%
Last 1 day
DBX
964,133
-1,999
-0,207%
Last 1 day
KOMPAS100
1.248,419
12,390
1,002%
Last 1 day
BISNIS-27
530,769
4,503
0,856%
Last 1 day

Currencies
Bahana Securities

23 Jun 2018 | 07:19 WIB
KURS
BUY
SELL

Brexit impact on Indonesia

The UK’s unexpected decision to leave the EU means uncertainties and the end of globalization with sentiment in European countries like France and Italy inching to referendums (exhibit 1). Hence, we expect flight to well-insulated economies like Indonesia, with 55.1% of 1Q16 GDP being local demand (exhibit 2), to occur going forward.

Worth noting is the IMF’s reduced global economic growth outlook even pre-Brexit. For Indonesia, we expect GDP impact to be limited as the country has a relatively low direct trade exposure to the UK of 1.0% in 2015 (exhibits 3). Hence, we maintain our 2016F GDP growth of 5.1% with downside coming from a possible second-round effect stemming from embittered trade relations between the UK and EU, which requires continued observations considering that the EU (ex-UK) accounted for 8.9% of total 2015 Indonesian exports.

On the back of Brexit, Indonesia could suffer from a stronger USD, hurting both the cost of imports and higher food-related inflation. In this regard, the USD and gold due to their safe-haven status have both appreciated with the latter having jumped 3.9% on 22-24 June, while on the flip side, the GBP dropped 7.6%. On the IDR, we have seen a limited impact down just 0.7%.

Looking ahead, however, we take comfort on the current low inflation as the government is already actively managing staple-related prices which should help to protect consumers’ purchasing power. Recently, BI mentioned that in the 3rd week of May, inflation was at 0.56%, far below our expectation at 0.8%. Finally, a successful tax amnesty should also bode well for the strength of the IDR in the next 9 months.

From a stock market perspective, we expect current market volatility to result in a flight to quality and safety. For Indonesia, we believe investors can find shelter in domestic exposure such as UNVR, TLKM, ICBP, ISAT, EXCL, ROTI and RALS.

For the dollar earners, there are concerns on soft demand on a weaker global economic outlook on a possible Brexit contagion. With a risk off condition, we note that gold stocks such as PSAB, ANTM, MDKA and UNTR may experience positive sentiment due to their safe-haven status.

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