Amid hegemonic struggles to win over China, a new era comes into play from 2026
With the dollar continuing to plunge and gold steadily gaining dominance over the USD, we will be appraising the world of finance from a different angle in 2026. China has proven surprisingly resilient in this “Trade War 2.0” in Asian markets, especially as Hongkong & Chinese equities continue to rally. ASEAN markets are also proving resilient, as Indonesia, Vietnam, and Singapore markets pick up strength. With the Fed expecting to shave its rate in FY26 (cutting 2x) while China’s market is positioned in a growth mode, we predict Indonesia will get a tailwind for East Asia Development in 2026, especially buoyed up by Chinese growth and that of ASEAN. The magnitude of Trump’s statement and policy still echoes to some extent. However, the bellicose noise has been muted, as Markets are getting used to his flip-flop policy, also known as TACO for “Trump Always Chickens Out”. We are still anticipating uncomfortably steep volatility in the market, while the overall direction is steadily upward. AI development, and new industries, i.e. EVs, robots, low altitude and renewables are expected to drive a new paradigm in commodity markets.

Indonesia is not going to detach from commodity markets
Despite Indonesia’s well-intentioned struggle to shift from a commodity market economy, in our view we are still one, with nickel, coal, tin, copper, gold and CPO likely driving economic growth, at least through FY26. After careful study, we conclude that Indonesian consumers’ disposable income bottomed out in 2Q25, transitioning into healthier purchasing power from 3Q25, at least until 1Q26, thanks to a more “pro-growth” new Finance Minister. Flush liquidity (as signaled by our finance minister last month) was the basis of the current rally in equity markets. YTD, JCI +16.9% hovers at 8,200 above the JCI target that we predicted months ago, while LQ45 currently stands at -3 – 4% YTD. Many fundamentalists claim that JCI is in a bearish mode, as LQ45 – the proxy of the most liquid companies – is down, especially banking stocks. However, checking out its liquidity, JCI is currently trading around IDR21 tn per day in a regular market, up from around IDR16tn per day over the past one month. Foreigners are cashing out from banking stocks, while retailers are flowing into conglomerate / growth stocks. The fundamental reason for this is apparently that banks are expected to only book around 4% -5% EPS growth in FY25, with a very minimum catalyst.

Banking stocks only exhibit a minimum compelling narrative
Let us dissect banking stocks in general, and why foreigners continue to pressure our banking stocks. EPS growth will likely stagnate in FY25 and this may even extend into FY26. EPS growth is around 4-5%, similar to GDP growth, which in macro terms is not really attractive. USD risk-free rate is around 3-4%, so in terms of a risk basis, it is not really compelling. Innovations are mostly carried out in banking stocks. During FY21, we witnessed the advent of an era of digital banks that could hype the market into banking stocks. FY25: few banks have any strong innovations; what we saw was only the reiteration of all their digital products, which have not yet materialized into bank earnings. Loan growth is limited, due to policy mishaps during the first year of the current administration, and it will take a while before we see any strong policy enactment. Therefore, banks will have to wait until the market is flush with liquidity, and there is a new growth engine – especially from the consumer class, along with capex growth.

The western world enjoys an “AI boom” – Indonesia has its “Gold Boom”
Western financial markets are flooded with an AI stock boom, with elevated multiples. Many observers warn this is the same as the dotcom era, with a bubble that will certainly pop. However, the bubble has not yet blown out, and nobody can predict when it might. The “use case” of AI is still in a growth stage, which means it could endure for a while. In Indonesia, we have not yet reached that level, but we have strong bargaining power in commodities. Gold is definitely the most compelling narrative in the Indonesian market, followed by a flow game. Fundamentally, the gold story makes sense for most market participants, as the detachment of the US dollar and the Asian economy is real, as China and India continue to purchase huge volumes of gold. The current multipolar world is creating an opportunity for the Indonesian market to perform, despite a weak macro headline. We may have the weakest macro among ASEAN countries but I am sure we are not far away from the bottom, so this creates a “safety net” for market participants to enter. However, we are a commodity country where most of the high narrative commodity play is in action. Thus, gold, silver, copper, nickel, coal and coking coal might lead the way.

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