How Investors Can Prepare for a Surprise Indonesia Election Outcome

How Investors Can Prepare for a Surprise Indonesia Election OutcomeBy Bloomberg

(Bloomberg) -- The race for Indonesia’s next president is going down to the wire. Here’s what investors and analysts suggest investors in the world’s fourth-most populous nation do.

The odds of Prabowo Subianto upsetting incumbent Joko Widodo in the April 17 election have risen as the campaign heats up with a recent pre-poll survey showing the president’s chances of winning below 50 percent. Given how Mahathir Mohamad pulled off a surprise victory last year in neighboring Malaysia, investors may be advised to not put all their eggs in one basket, according to money managers and strategists.

While a win for Widodo, known as Jokowi, would mean an extended rally for the world’s best-performing major equity market, his defeat may trigger an upheaval. While Jokowi still remains the firm favorite to win a rematch of the 2014 election, some analysts say Prabowo can pull off the impossible.

Indonesian stocks have rallied six months before and after every election after direct presidential polls were introduced, with the biggest gain seen so far when the system was first used in 2004, according to Sook Mei Leong, head of global markets research at MUFG Bank Ltd.

Election outcomes tend to impact the currency and bonds less, she said in a report dated Feb. 15. The benchmark Jakarta Composite Index is up 12 percent since the middle of October, while rupiah is up almost 7 percent, mostly on dwindling odds of further U.S. Fed rate hikes.

Snapshot of pre-poll surveys

Bloomberg spoke to money managers and analysts on the best strategies for investors ahead of the vote.

John Rachmat, strategist at PT Pinnacle Persada Investama

Alan Richardson, fund manager at Samsung Asset Management

Harry Su, managing director and head of equity capital markets at PT Samuel International

Jemmy Paul, chief executive officer of PT Sucorinvest Asset Management

Sook Mei Leong, Asean head of global market research at MUFG Bank

George Efstathopoulos, portfolio manager at Fidelity International

Hans Redeker, analyst at Morgan Stanley

--With assistance from Abhishek Vishnoi, Natalie Lung and Ruth Carson.

To contact the reporter on this story: Harry Suhartono in Jakarta at hsuhartono@bloomberg.net

To contact the editors responsible for this story: Divya Balji at dbalji1@bloomberg.net, Teo Chian Wei, Thomas Kutty Abraham

For more articles like this, please visit us at bloomberg.com