2024 Elections: What’s Next?

• • The legitimacy of Prabowo Gibran's votes based on 58% quick count would hinge on the judicial steps taken by the other two presidential pairs before the KPU's final result announcement on March 20th.
  • If the election results are not contested, then we expect market sentiment to remain relatively solid with continuing foreign inflow into the JCI which amounted to IDR 3.8tn on February 15-16.
  • However, given limited market euphoria thus far, we advise investors to remain vigilant on the trading side, particularly on further market increases in the lead up to October's cabinet formation (inauguration date: 20 October 2024).
  • On the economic front, we expect potential fiscal expansions to stem from infrastructure projects, military spending, initial steps toward procurement of free meals and milk programs, and increased teachers' benefits.
  • With Sri Mulyani unlikely to continue as FM, the possibility of widening fiscal deficit from our FY25 initial projection of 2.1% to 2.7%, coupled with current account deficit of 1.0%, we expect pressure on the IDR and the bond market to remain.
  • Hence, we recommend stocks with heavy IDR costs (i.e. BBNI, BBRI, HMSP) but suggest investors to remain cautious on dollar earners (i.e. commodity related stocks) due to weak global economic outlook.
  • If the election results are not contested, then we expect market sentiment to remain relatively solid with continuing foreign inflow into the JCI which amounted to IDR 3.8tn on February 15-16.
  • Additionally, with our twin deficits, we are positive on high-yielding SOEs (i.e. BBRI, PTBA, PGAS, TLKM, JSMR).
  • On beneficiary of IKN and the upcoming government food program, we respectively favor SMGR and ICBP.
  • At this stage of the market cycle, we slightly adjust upward our index target from 7,600 to 7,800 (implied FY24 PE: 13.3x, EPSG: 8.6%) on the back of lower market risk premium, helped by continued stable security condition on the ground post elections.