While investors are recapitulating, JCI might re-rate slightly in FY25, to 13-14x PE

Although the EPS growth trajectory remains similar to that depicted in our previous report,
indicating low single-digit growth, a recent influx of foreign investors into Indonesia may be
attributed to subdued trade tensions, along with appreciation of the Indonesian Rupiah (IDR)
against the US dollar (USD). Consumption continues to be the weakest aspect of Indonesia's
economy, largely attributed to a lack of consumer stimulus and insufficient government
efforts to support the middle-income class. However, a recent shift in global geopolitics in the
Indo-Pacific region, along with China's increasing close collaboration with Indonesia, could
stimulate foreign direct investment (FDI) in coming years. Indonesia's minimal presence in the
US economy may enable it to sidestep some domestic economic challenges. Conversely,
China's strong dominance in global trade could allow Indonesia to capitalize on its competitive
advantages in commodity markets, particularly in nickel, coal, crude palm oil (CPO), and
copper. Domestically, while a decline of the middle-income class seems inevitable, we are
approaching a turning point for consumer purchasing power, thus anticipating improved
momentum for retailers next year. Consequently, we have upgraded our Jakarta Composite
Index (JCI) target, adjusted from 7,200 to 7,600.

Bond market volatility signals fundamental shift in global policy coordination

The global bond market has endured significant turmoil over the past month. The United
States finally lost its triple-A credit rating, as disappointing long-term government bond
auctions briefly pushed the yield on 30-year US Treasuries above 5%. Meanwhile, Japanese
30-year yields surged past 3%, reaching all-time highs. This volatility portends a fundamental
breakdown in coordinated global monetary policy, as major economies veer off onto vastly
different interest rate paths, indexed to varying inflation and growth dynamics. Market
participants are desperately searching for alternatives to US Treasuries, and are thus
seriously considering European, Chinese, and Japanese government bonds as potential
portfolio diversifiers. With such profound uncertainty in the global bond market, we predict
that precious metals – i.e., gold, silver and potentially copper will safely remain in positive
territory for the remainder of the year.

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