JAKARTA / SINGAPORE, 3 December 2025 — Nomura has raised its recommendation on Indonesian stocks to “overweight”, citing attractive valuations, improving policy support and stronger growth outlook for the market. The upgrade reflects a reassessment of Indonesia’s equity risk-return profile amid regional asset‐allocation shifts.
According to Nomura’s research note, equities in Indonesia are trading at comparatively low cyclically adjusted valuations, positioning the market favourably versus peers. At the same time, growth-oriented policies, including infrastructure acceleration, domestic consumption support and corporate governance reforms, underpin a more constructive backdrop for Indonesian equities.
Key Drivers Behind the Upgrade
- Valuation gap: Indonesian stocks appear relatively cheap against long-term averages and regional comparators, offering potential upside if growth holds.
- Policy momentum: The government’s increased focus on infrastructure investment, digital-economy expansion and reforms (such as tax/investment incentives) enhances medium-term earnings prospects for both domestic and foreign-invested firms.
- Growth outlook: Indonesia benefits from favourable demographics, rising personal consumption, improved investment climate and potential re-rating as foreign-investor flows shift toward under-owned emerging markets.
- Liquidity & capital flows: With global investors searching for higher-yielding and growth-oriented emerging-market exposure, Indonesia may gain share of regional equity allocations.
- Domestic reforms: Additional tailwinds include ongoing efforts to improve corporate transparency, streamline bureaucracy and deepen capital markets, factors that may reduce country‐risk premia.
Implications for Asia-Pacific and Regional Investors
- Regional allocations: Investors with Asia-exposure may want to reassess weighting toward Indonesia, particularly if an “overweight” stance holds for the next 6-12 months.
- Sector rotation opportunities: With infrastructure and consumption themes highlighted, sectors such as construction, digital-services, consumer staples/discretionary and domestic-financials may benefit most.
- Risk-/reward calibration: While upside potential is seen, investors should monitor execution risk, financing costs for large projects and external shocks (commodity, FX or global growth) that could weigh on sentiment.
- Emerging-market comparison: Indonesia’s enhanced profile may lead it to outperform regional peers (e.g., Malaysia, Philippines, Vietnam) if flows rotate toward stronger policy/growth stories.
- Currency and yields: A more favourable equity view may also support the Indonesian rupiah and local-bond market, especially if external funding conditions remain stable and domestic growth holds.
Watch-Points & Risks
- Domestic policy execution: Infrastructure roll-out, investment approvals, digital-economy spending and reform implementation must proceed without significant bottlenecks.
- External environment: Emerging-market equities remain sensitive to U.S. rate moves, global growth surprises, commodity cycles and currency pressures. A reversal in flows could dampen the upgrade’s impact.
- Valuation hangover: If valuations rebound but earnings disappoint, the carry trade may reverse and valuations tighten quickly.
- Corporate governance risk: As foreign investors engage more with Indonesian equities, governance, minority rights, transparency and regulatory consistency will matter.
- FX and interest-rate risks: A weaker rupiah, higher domestic rates or capital-outflow risk could offset equity gains and increase portfolio volatility.
