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Investing.com -- JPMorgan released a report on Indonesian equities, indicating a positive shift in the market as foreign capital flows turned favorable in May.
For the first time since a seven-month outflow period spanning from October 24, 2024, to April 25, 2025, which saw over $3 billion leaving the market, Indonesia experienced an influx of approximately $300 million. This change is attributed to a variety of factors, including a weaker U.S. dollar, easing global tariff tensions, and rising optimism around Indonesian company Danantara.
Despite a historical trend of equity sell-offs in May, often due to dividend repatriation impacting the Rupiah, JPMorgan suggests that the recent reversal in fund flows aligns with patterns seen in other ASEAN markets. The firm raises the question of whether investors should consider staying invested in May rather than withdrawing.
JPMorgan anticipates continued market volatility and soft fundamentals, with potential downward earnings revisions. However, they also recognize a near-term tactical trading opportunity in the Indonesian equity market, propelled by the resurgence of foreign investment and specific domestic factors.
The firm highlights three key catalysts that could further enhance market prospects in the second half of 2025: increased government spending to boost domestic consumption, the execution of Danantara’s state-owned enterprise reform plan along with new foreign direct investments to stimulate economic growth, and an improving geopolitical landscape encouraging funds to return to emerging markets.
Additionally, JPMorgan’s Economics and FX team have revised their 2025 GDP growth forecast for Indonesia to 4.7%, up from 4.5%. They also adjusted the year-end Rupiah forecast to Rp16,200 per U.S. dollar from Rp16,700. In a broader context, JPMorgan has lowered its recession probability estimate to 40% from 60% and has shifted its stance on emerging markets to overweight.
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