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Charlemagne’s Gems: Indonesia – fragile five or fighting fit?

by Julian Mayo on Feb 07, 2014 at 10:22

Growing sectors have included cars, with Honda and Nissan both committed to new investments, and electronics. An improved regulatory environment has made the country more attractive for investment in areas such as power and pharmaceuticals.

Best ideas

Among our preferred investments in Indonesia is AKR, a logistics and infrastructure business.

Key areas include fuel distribution and a new port and industrial estate near Surabaya, the nation’s second largest city.

Profits are set to grow rapidly in the coming two years. We also invest in Bank Central Asia, the highest quality bank in the country with a return on equity of around 25%.   

Finally, we like Malindo Foods, a chicken producer whose profits are set to double in the next two years.

In the short term the market may continue to be affected by global factors.

However, the sharp outperformance of Indonesian stocks so far this year suggests that investors are looking beyond the immediate risks.  Domestic demand is likely to be weak in the coming months, but, as the economy goes through the process of rebalancing, the longer term outlook for Indonesian stocks is encouraging.

Citywire A-rated Julian Mayo (pictured) is the co-portfolio adviser of the Magna Emerging Market Dividend fund and the co-chief investment officer of Charlemagne Capital.

According to Lipper, the fund returned 1.4% in 2013 versus a -4.1% loss in the benchmark

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