In the last minutes, Golkar Party throw its support behind Prabowo Subianto, making Gerindra led coalition now control more parliament seats vs. PDI-P led coalition. This appears to be taken negatively by market, thus profit taking was seen in JCI after the announcement.
While we are increasingly cautious in the near term, our concern is much less about Jokowi’s ability to win presidential election, but more about ability of PDI-P to control parliament in order to support Jokowi’s government. Based on the current position (see table below), PDI-P will have a choice between securing more parliament support from a few more smaller parties or securing support from Golkar to gain at least 51% parliament seats. Neither one is likely to happen without “semi-transactional” coalition vs. non-transactional coalition promoted by Jokowi.
Our preferred sector in Indonesia remains health care (KLBF, KAEF), infrastructure (JSMR, PTPP, ADHI, INTP), mass market consumers (RALS, GGRM, MPPA), and selected commodities (INCO, TINS, AALI, BRMS). The biggest wildcard remains Bakrie related stocks as he appears to remain highly influential in Indonesian politics after the parliament election.
Source: Maybank KimEng
