Indonesia Has The Highest Profitability In Asia

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Four Pillars of GDP: Driven by private consumption

Indonesia has good GDP growth, driven mainly by private consumption and secondly investments. Government consumption contributed the least to GDP growth in the past four quarters.

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See 2017 Hedge Fund Letters.

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Highest profitability in Asia reflected in valuation

Indonesia has had, and consensus expectations are, that the country should continue to have the highest ROE in Asia. This is also reflected in the valuation, Indonesia’s 2018CE* 2.9x PB is the highest in Asia ex Japan.

A. Stotz Four Elements: Indonesia’s rank relative to Asia

Overall, Indonesia appears third most attractive in Asia considering all our four elements: Fundamentals, Valuation, Momentum, and Risk.

Fundamentals: Indonesia has the highest ROE in Asia.

Valuation: This strong profitability is reflected in the highest PB in Asia.

Momentum: Good price and earnings momentum.

Risk: Relatively low volatility and low beta to Asia ex Japan.

Massive price performance in Utilities and Materials

Top 3 largest sectors: Financials: 31% of the market; Consumer Staples: 23%; Consumer Discretionary: 10%.

Best sector & stock: Utilities: +29.7% & PT Perusahaan Gas Negara (Persero) Tbk: +42.8%

Worst sector & stock: Health Care: -3.7% & PT Kalbe Farma Tbk: -11.9%.

*CE is consensus estimates.

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Dr. Andrew Stotz, CFA is the CEO of A. Stotz Investment Research, a company providing institutional investors with ready-to- invest portfolios in Asia that aim to beat the benchmark through superior stock selection. The company also provides buy- and sell-side clients with financial models to value any company in the world and World Class Benchmarking to determine what companies are financially world class. Previously, as Head of Research at CLSA, Andrew was voted No. 1 Analyst in Thailand in the Asiamoney Brokers Polls for 2008 and 2009. He was also voted No. 1 Analyst in Thailand in the 2009 Institutional Investor magazine All-Asia Research Team Report. Andrew earned his PhD in finance at the University of Science and Technology of China in Anhui province, with a focus on answering questions raised by fund managers and analysts during his career about picking stocks and managing portfolios. In addition, Andrew has been a lecturer in finance for 22 years at various universities in Thailand. Since 2013, he has been the president of the CFA Society of Thailand. He is also the author of How to Start Building Your Wealth Investing in the Stock Market.