Indonesia: Lower FY25 GDP Growth to 4.8% and Wider CAD to 1.5%. Trump tariffs will slow global economic growth, including Indonesia’s. Despite our limited reliance on U.S. exports (just 1.9% of GDP), indirect risks exist stemming from Indonesia’s exposure to China. As a result, our economist has recently cut Indonesia's GDP growth to 4.8% in 2025, down from 4.97% previously. This is primarily on the back of worsening IDR depreciation driven by widening current account deficit to 1.5% from 1.4% previously. With the U.S. 10-year Treasury yield at beyond 4.4% (as of April 11, 2025), we expect the Fed Rate to remain high longer, resulting in limited ability by Bank Indonesia to cut interest rate ahead as the central bank focusses on IDR stability.

Preference for Defensives, High Dividend Plays & Selective Alpha Stocks. Prolonged tariff turmoil poses downside risks to JCI’s EPS growth this year, primarily driven by weak demand outlook due to subdued purchasing power, lower margins from rising USD-linked input costs, and interest rate levels remaining elevated. Given these conditions, we maintain OW stance on stocks with high dividends and solid fundamentals that can raise prices to maintain margins, particularly in the Consumer, Poultry, and Telco sectors. Support for these sectors include government stimulus such as the free meal program and the 6.5% minimum wage increase. On the flip side, we remain cautious about the metal mining sector on lower volumes and prices due to China’s economic slowdown, despite certain metals like copper and nickel being exempted from the tariff hike.

Cut Year-end 2025F JCI to 6,900 on Lower EPS Growth Estimate of 1.6%. Recent domestic developments, including the announcement of higher dividend payouts from SOE banks post the formation of Danantara and OJK's new policy allowing share buybacks without GMS amid market volatility, have alleviated some domestic negative sentiments. However, we have revised our 2025 JCI base case target to 6,900 (from 7,300), reflecting FY25 PE of 12.0x, still above the regional average of 11.3x. This adjustment reflects our downgraded FY25F JCI EPS growth forecast of 1.6% (previously 4.7%), in line with our economist’s revised USD/IDR assumption of IDR 16,900 (vs. IDR 16,600). Our sensitivity analysis suggests that for every 1% depreciation in the IDR would reduce JCI earnings by 1.3%. Our top-picks consist of defensive stocks: BBCA, TLKM, ICBP, AMRT, and JPFA. Our dividend plays remain unchanged: ASII, HMSP, UNVR, PTBA, and TAPG. Finally, we have made a couple of changes to our alpha picks as follows: BRMS, SSMS, RAJA, WIFI, and SSIA. On a more negative note, stocks which may be at risk of reporting soft 1Q25 earnings are: BBRI, JSMR, MEDC, INCO, and AKRA.