Last week, Indonesia inaugurated Prabowo Subianto as its new President for the 2024-2029 term, marking the end of Joko Widodo's (Jokowi) successful decade-long presidency. Prabowo began his administration by selecting key ministers from Jokowi’s cabinet, including Sri Mulyani as Minister of Finance. This decision signaled a commitment to policy continuity, helping to ease investor concerns and reduce uncertainty, particularly regarding Indonesia's debt outlook. Sri Mulyani's reputation for fiscal prudence is expected to strengthen investor confidence, attracting increased foreign investment.

Prabowo’s Policy Agenda

During his campaign, Prabowo pledged to provide free meals for schoolchildren and improve food security by reducing reliance on imports of essentials like rice and sugar. To support these initiatives, he has started allocating funds from the national budget, focusing on infrastructure and ecosystem development that will benefit SMEs and MSMEs, thereby boosting the local economy. Prabowo also aims to extend Jokowi’s mineral downstream strategy, leveraging Indonesia’s mineral wealth to attract industrial investment beyond nickel. This is expected to create jobs, increase tax revenue, and drive economic growth, creating a positive ripple effect across various sectors.

Upon taking office, Prabowo committed to addressing Indonesia’s housing needs by pledging to build three million low-cost homes annually. Additionally, he is currently working on initiatives to ease the debt burdens of millions of farmers and fishermen, improving their access to credit and financial resources.

Simpan Views

Sustained Economic Growth

Prabowo’s policies appear to be growth-oriented and positive for Indonesia’s economy. However, his ambitious goal of achieving 8% GDP growth over his tenure may pose challenges, particularly in the current global environment. Despite this, economists expect Indonesia to outperform many of its Southeast Asian peers over the coming decade. GDP growth is projected to remain steady between 5-5.2% in 2025, driven by these new initiatives.

What’s next for your portfolio?

In light of the global macroeconomic environment, we’ve made adjustments to the Simpan Bond Fund, by slightly increasing exposure to mid-to-long-duration government bonds to lock in attractive yields. However, we are mindful of the new government’s fiscal policy and potential impact on the economy’s debt to GDP. Therefore, we remain cautious towards over extending duration in Simpan’s Bond Fund. 

Meanwhile in Simpan’s Sustainable Equity Fund, we are building positions in mid-to-large-cap stocks in the property and real estate sectors, which are set to benefit from Prabowo’s housing initiatives. We’re also continuing to increase our allocation into commodity-driven stocks, which stand to gain from the government’s plans for industrial development and diversify Indonesia’s resource exports.

Investment Opportunities

For those looking to grow their cash, our Simpan Cash Fund offers competitive yields and stable returns. With an average of 4.4% in Net Returns over 1-Year, our Simpan Cash Fund has consistently outperformed Bank Deposito rates.

For investors seeking to grow their wealth, our Simpan Bond Fund and Simpan Sustainable Equity Fund are excellent choices. Given the current rise in bond yields, now is a particularly opportune time to consider our Simpan Bond Fund. This fund offers attractive returns and potential capital gains, with a target return of 5-7%, making it a smart investment for long-term investors. Our Simpan Sustainable Equity Fund, on the other hand, provides exposure to strong stocks with promising long-term growth potential in line with Indonesia’s economic growth.