Wealth Recalibrate

The #newnormal life has begun. Many things must be prepared, not only physical and mental health, but also financial health which is highly important.

eTalk Series is back for the umpteenth time on Thursday, 4 June 2020. This activity aims to provide outlook and guidance on the current economic and capital market situation, providing clarity in investment planning for either growing or protecting the wealth of Bank DBS Indonesia customers. With the theme of Economics and markets perspectives: Re-calibrating growth in the time of COVID-19, the event was delivered by economic expert Masyita Crystallin Ph.D - Special Staff of the Ministry of Finance of the Republic of Indonesia and market practicioner Vina Cahyadi - Head of Distribution Sales BNP Paribas Asset Management.

On this occasion, the speakers discussed the current economic situation which has an impact on the investment market.
  • Review of all economic policies issued by the government and their impact on the investment climate
  • The outlook of strategic partners on developments in the stock market locally and globally
  • These variables certainly affect portfolio and investment opportunities
In her presentation, Masyita Crystallin said that Covid-19 is still ongoing and has a profound impact on global economic growth and financial market.
  • This economic turmoil has actually occurred since mid-December 2019 when COVID-19 first hit Wuhan. In fact, financial assets were still quite high in January and February 2020, as seen from the capital inflows to developing countries. Even Rupiah is among those that received the best appreciation in emerging Asia.
  • After WHO announced the status of a pandemic in mid-March 2020, economic conditions suddenly dropped, the vex or volatility indicator reached an unprecedented high. Rupiah weakened considerably in March. However, Rupiah’s position strengthened after the government issued the first Global Bonds with a fairly long tenor on April 8th.
  • By mid-April 2020, the market has started to get 'used' with the news of the COVID-19, allowing the financial sector to be less sensitive as seen from the Vix indicator and financial sector indicators since mid-March, which has been improving continuously until today.
  • Indonesia has only started to feel the impact of COVID-19 since mid-March and has begun to put pressure on Indonesia's economic growth. However, when compared to countries such as Malaysia, the Philippines, and Vietnam, Indonesia is considered quite resilient in dealing with COVID-19.
  • The government is trying to identify the domino effect and take preventive measures by providing a stimulus to sectors that are the main priority, namely the health, social, economic, and financial sectors. When compared with the economic crisis in 1998, the non-formal sector became the shock absorber because the formal sector was the one affected at that time. However, during this pandemic, the informal sector will be affected first and foremost due to the social restrictions that must be implemented. For this reason, the non-formal sector, MSMEs and labor-intensive sectors should receive first assistance.
  • The various forms of stimulus currently undertaken by the government include social safety net, health budget for handling COVID 19, subsidies for workers and prevention of layoffs, assistance to the business world, especially MSMEs, tax incentives, subsidized electricity bills, lowering interest rates, Quantitative Easing (QE), a moratorium on debt/credit payments
  • The economic recovery programs currently prepared by the government are:
    1. Interest subsidy and basic subsidies for MSMEs and Micro programs
    2. Additional working capital assistance for labor-intensive sectors
    3. Additional government guarantee assistance for credit so that banks do not feel the risk averse is too high.
Meanwhile, Vina Cahyadi as a market practitioner explained that Covid-19 has put pressure on the global economy, and has the potential to lead to a period of recession and increased volatility in financial market. Factors that need to be considered and which greatly influence global financial market are the re-opening of the economy, escalating tensions between the US and China regarding the trade war, issued economic indicators, and the unemployment rate.

Even though the economy has started to reopen around May 2020, especially in European countries where infection rates have started to decline, it is still very minimal. With the high risk of volatility on the financial market, investors really need to be more neutral in managing their investment portfolios in various asset classes.

In Indonesia, the opening of the market will depend on the reaction and discipline of the people. If the infection rate increases, it is likely that the PSBB relaxation will be tightened again.
Then what should we do while waiting for the market re-opening? Maintain a neutral position on various assets!

Contact your RM to get personalized solutions that will be tailored to your investment goals.

Look forward to the next eTalk Series event by Bank DBS Indonesia.