The COVID-19 pandemic has been going on for almost two years. Meanwhile, financial markets tend to move dynamically.

 

Entering the final quarter of 2021, there are many things that can help investors remain optimistic to seize investment opportunities by the end of the year, but some that need to be observed both globally and domestically. There is a risk of.

What are the current global and domestic conditions, and what are the investment opportunities for the fourth quarter of 2021? See the description of Freddy Tedja, Head of Investment Specialist at PTManulifeAsetManajemen Indonesia (MAMI).

The tapering signal of the Federal Reserve

The tapering signal of the Federal Reserve Board or the decline in stimulus from the US Central Bank appears to be increasingly apparent in the fourth quarter. The Federal Reserve Board’s rate hike is projected to go faster, reaching 0.50 percent in 2022.

Inflation and economic growth goals have also changed. Inflation is expected to be higher than previously estimated this year due to more sustained global supply chain disruptions than expected.

The Federal Reserve Board also revised US economic growth to 5.9% in 2021 as a result of an increase in delta variant COVID-19 cases in the United States (US) in the third quarter of 2021.

However, 2022 economic activity is expected to improve in line with the improvement in the pandemic situation, as evidenced by the increase in US GDP forecasts for 2022 from the original 3.3% to 3.8%.

In the Asian region, economic growth in the Asian region is expected to normalize in the second half of 2021, as the initial low-base effect of the pandemic was mitigated in 2020 and economic growth surged in the first half of 2021.

Supported by a global recovery (especially demand for electronic products such as computer chips), the external sector, or exports, continues to be the mainstay. The valuation of the Asian stock market is also interesting.

In the first half of the year, soaring due to the surge in economic growth, the current stock market valuation fell again to the five-year average. This is an attractive level for investors.

Moreover, for the ASEAN region, inflation remains low and restrained, so central banks are not putting pressure on policy tightening. This situation certainly supports the stock market.

Moderate recovery of domestic economic activity

The decline in the number of COVID-19-positive cases in the country and the ever-increasing vaccinations have made it possible to mitigate community activity, opening up the possibility of a domestic economic recovery.

In particular, the continued strengthening of macroeconomic stability from the outside may provide good support in anticipating the Fed’s taper and facing global dynamics that are not yet fully stable.

Increased foreign exchange reserves, curbing inflation and steady growth in the trade balance (backed by demand and commodity prices) are expected to maintain rupiah volatility ahead of the FRB’s tapering.

After relaxation in the fourth quarter of 2021, some key indicators (consumer confidence index, retail sales, real estate sales, manufacturing) are expected to improve in the coming months.