The Winners and Losers From Indonesia’s $206 Billion Budget

The health-care sector is least favored by analysts because it is likely to benefit most from policy support.

The Southeast Asian nation will shift its economy into producing more value-added goods and away from solely selling raw materials according to the president. He announced plans to cut health-care and social protection spending in a speech to parliament.

Indonesia is one of the world's biggest producers of energy products including natural gas, coal and palm oil. The benchmark Jakarta Composite Index, which has rallied 8.4% this year through Tuesday, could see further gains. As the market reopened after the independence day holiday, JCI gained as much as 0.6%.

Indonesia aims to shrink the budget gap in the future.

The focus on fiscal discipline will likely be welcomed by the stock market. Indonesia is a bustling consumer market, and investors will be encouraged by that. The palm oil and rubber companies will benefit from the reopening.

The head of research at BCA Sekuritas said that winners include miners and firms that are expanding. The shares of Vale are up 40% while Aneka is down.

Despite concerns about a possible US recession, plans to reduce borrowing as well as a target for gross domestic product growth to return to pre-pandemic levels will boost market sentiment.

Kota Hirayama, an economist at SMBC Nikko Securities, said that Indonesia's fiscal improvement is faster than other countries. While a cut in spending is a worry for the economy, a large part of its negative impact can be absorbed given the country's economic growth has come back to its cruising speed before the swine flu epidemic.

The main winners andlosers from the budget are listed.

WINNERS

• Mining companies: PT Adaro Minerals Indonesia, PT Merdeka Copper Gold and tin producer PT Timah should benefit from moving into downstream production, said BCA Sekuritas’ Benas, with increasing global and automotive industry demand for their products. Adaro Minerals climbed as much as 3.7% on Thursday, Merdeka Copper was down 2.4% and Timah added 2%.
• Technology, banks and telecommunications: A target for 30 million smaller businesses to use digital systems by 2024 will support e-commerce platforms such as PT GoTo Gojek Tokopedia and PT Bukalapak.com, as well as lender PT Bank Rakyat Indonesia. Telecom companies and tower operators PT Telkom Indonesia, PT XL Axiata, PT Indosat, and PT Sarana Menara Nusantara are also seen as beneficiaries. Bukalapak gained 1.8%, BRI was up 1.4% and Telkom rose 1.6%.
• Property and construction companies: A target to see private investors funding most of the development of Indonesia’s new national capital in Borneo offers opportunities to real estate developers such as PT Bumi Serpong Damai, PT Ciputra Development and PT Summarecon Agung, as well as contractor PT Acset Indonusa. Bumi Serpong added as much as 1% in early trade, while Ciputra Development fell 1%.
• State builders PT Wijaya Karya, PT Adhi Karya, PT Waskita Karya as well as toll-road operator PT Jasa Marga will benefit from higher infrastructure spending. Wijaya Karya rose 2.8%, Waskita was up 2.6% while Jasa Marga declined 0.9%.

LOSERS

With the assistance of a person.