President Joko Widodo and several economy ministers officially closed the trade session in 2017. (30 Dec. 2018)

JAKARTA (TheInsiderStories) – Good Morning. Today, Indonesia holds regional elections to elect 17 governors, 39 mayors and 115 regents. More than 150 million Indonesians will head to the polls.

The regional election is seen as a major exercise in democracy in advance of next year’s presidential polls and a test for President Joko Widodo’s chances to be re-elected. The simultaneous and peaceful election, is expected to mitigate the turmoil resulting from the uncertainty of the external factors.

For investors engaging in both portfolio and direct investments are now assessing their strategies on how to surf safely in the political tides and still make handsome gains, as Indonesia enters in another election season, starting from regional campaigns to elect governors and regency heads, parliament members and president election next year.

Investors do agree that political risk customarily looms large whenever the country holds elections. However, there are still plenty of possibilities and opportunities when it comes to investing in a ‘political year’.

For business players, the big challenge is to run the business as usual, to expand or consolidate. Therefore, investors need to have contingency plans to anticipate such situation.

However, during political years, there is nothing more irrational than when a narrative goes wrong, a wide range of opinions erupts, regarding potential market outcomes in a new political environment. The dispersion and polarity of beliefs is perhaps the widest.

Wimboh Santoso, Chairman of Financial Services Authority, believes that the regional elections to elect governors and regency heads across the nation should exert limited impact on the country’s banking industry, including lending activities. He acknowledge, as happened in the past, the regional elections would trigger an increase in consumption related to the campaign and other activities.

Eric Sugandi, an economist from SKHA Institute for Global Competitiveness, predicts there will be only a limited outflow regarding political risk in this year, taking in account external factors such as the U.S’s Federal Reserves (Fed) normalization and tax policy to reduce income tax, which will trigger more volume to flow into the U.S Treasury.

In term of investing in the stock market, analysts said that investors, in particularly conservative ones, are likely opting to choose defensive stocks as these are resilient to any market upheaval. Market players appear to have a common belief that there will always opportunities even in ‘rough seas’, as long as players embrace the proper strategy in seizing opportunities.

Domestic Market

This day, we predicts the Jakarta Composite Index (JCI) is still difficult to move into positive territory in trading today, Wednesday (27/06). Some negative sentiment from domestic and global side will have a negative impact on the market.

Positive sentiment comes from statement of Finance Minister Sri Mulyani Indrawati yesterday. She projected Indonesian economic growth in the second quarter of 2018 could reach 5.2 percent or better than the first quarter of this year 5.06 percent. Household consumption, investment, government spending and exports are still dominant supporting economic performance in 2Q 2018, added the ministers.

On the other hand, the government will strengthen foreign exchange reserves in order to reduce the current account deficit. So far foreign exchange reserves fell 6.89 percent from $132 billion in January 2018 to $122.9 billion in May.

Foreign exchange reserves fell, as a result of maintaining rupiah stabilization against the U.S dollar and a trade deficit of $2.83 billion as of May. Meanwhile, BI projected a current account deficit in second quarter will widen.

Email: linda.silaen@theinsiderstories.com

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