Indonesia Protests in Rear View as Analysts Bullish on Earnings

Despite recent social unrest, analysts are bullish on Indonesia's corporate earnings, with 12-month forward profit estimates for the Jakarta Composite Index rising over 4% since protests began. This growth in earnings estimates, contrasting with largely unchanged regional gauges, underscores Indonesia's position as one of Asia's strongest equity markets.

Analysis

Despite recent social unrest in Indonesia, analyst sentiment on corporate earnings remains decidedly bullish. Over the past two weeks, coinciding with the protests, 12-month forward profit estimates for companies on the Jakarta Composite Index have increased by more than 4%. This upward revision is particularly noteworthy as earnings estimates for a broader regional gauge remained largely unchanged over the same period, highlighting the perceived strength and resilience of Indonesian fundamentals. The market's ability to look past short-term political instability suggests that investors are prioritizing the country's underlying growth prospects, solidifying Indonesia's position as a standout equity market within Asia.

Key Decisions for Investors

• Investors may consider the market's resilience to social unrest as a signal to maintain or increase exposure to Indonesian equities, focusing on strong domestic growth fundamentals.
• The divergence in earnings estimate revisions suggests a tactical overweight to Indonesia relative to a broader Asian or emerging markets portfolio could be warranted.
• It is prudent to monitor for any escalation in social instability that could begin to materially impact consumer or business confidence, as this remains a key risk that could challenge the current bullish earnings outlook.