Here Are Winners and Losers From Indonesia’s $188 Billion Budget
(Bloomberg) -- Healthcare, infrastructure and technology stocks may emerge as winners from Indonesia’s annual budget, which is slowing spending to balance growth and deficit. Retail, transport and tourism remain the least favored sectors as the pandemic lingers.
PT Kimia Farma and PT Kalbe Farma are among drugmakers seen benefiting from the 50% higher spending on healthcare that focuses on vaccines and procurement of medical equipment, according to RHB Research’s analyst Andrey Wijaya.
Southeast Asia’s biggest economy will spend 255.3 trillion rupiah ($17.8 billion) on health in 2022, even as total state budget is cut to meet a lower deficit target. With just 11% of its 270 million people fully vaccinated, the government is deploying all resources to inoculate more people to curb the coronavirus pandemic, President Joko Widodo said in his budget speech on Monday.
E-commerce marketplace PT Bukalapak.com and digital lenders like PT Bank Jago are also set to gain from the government’s pledge to build infrastructure to support digital transactions as mobility restrictions send customers online for shopping and other services.
”The pandemic has accelerated online consumption adoption and increase e-commerce traffic at an unprecedented rate,” said Henry Wibowo, head of research at JP Morgan Sekuritas Indonesia. The government driving digitalization in micro, small and medium enterprises is positive for companies engaged in e-commerce, he added.
Other winners and losers from the 2022 budget:
- Hospital operators - PT Siloam International Hospitals, whose shares have risen 50% so far this year, and PT Medikaloka Hermina, which has jumped 63%, stand to gain further from the higher health budget.
- Information technology and communications-related companies - they will benefit from the government’s plan to add 2,344 telecommunication towers and an increase of 25 gigabytes per second in satellite capacity. MNC Sekuritas’ Head of Research Thendra Crisnanda favors PT Telkom Indonesia, PT XL Axiata, PT Smartfren Telecom, PT Tower Bersama Infrastructure and PT Sarana Menara Nusantara, while digital banks, such as PT Bank Rakyat Indonesia Agroniaga and Bank Aladin Syariah are also among the firm’s top picks.
- Infrastructure and construction - the industry was among the hardest hit by movement curbs and the diversion of spending toward healthcare. However, the government is ready to resume major projects in 2022, potentially turning the course around for stocks including state construction firms such as PT Wijaya Karya and PT Waskita Karya.
- The construction of 205-kilometer long roads, new airports at six locations and expansion of gas network for households are listed as some of the projects that will be funded under a 384.8 trillion rupiah of infrastructure spending next year.
- Brick-and-mortar retailers - they may continue to feel the pinch as consumers grow more comfortable buying things online, according to RHB’s Wijaya. PT Ramayana Lestari Sentosa shares have tanked 20% year-to-date, while those of PT Mitra Adiperkasa and PT Ace Hardware Indonesia dropped 14% and 13%, respectively.
Transport and tourism-related companies - the government has postponed a plan to reopen major holiday destination Bali to lure travelers and those wanting to work from the island.
- Cargo businesses may offer the only opportunity in the transport sector as people step up spending via online marketplace.
- Cigarette makers - the government has significantly increased its tax collection target under the new budget, including excise revenue that is set to rise by almost 12% to 203.9 trillion rupiah in 2022.
- An increase of more than 20% will hurt producers, according to MNC’s Crisnanda. Major producers PT HM Sampoerna and PT Gudang Garam have both dropped more than 20% this year.
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