Indo’s economy grew fastest in SE Asia in 1Q09 as domestic spending accelerated at its fastest pace since 2000. Household consumption accounts for 64% of GDP and Indonesia’s GDP per capita doubled from 2002 in US$ term.
The immediate outlook for discretionary items still looks weak as companies struggle with a cyclical slowdown. However, Indonesia’s long term characteristic should help the country to deal with current crisis: population growth, urbanization, low per capita consumption, and rising income.
Key points from the report:
· Indonesian economy has been relatively resilient in the current global economic crisis since household consumption accounts for 64% of GDP. Grocery sales were up 7.6% yoy in 1Q09.
· The immediate outlook for discretionary items looks weak as companies still struggle with a cyclical slowdown: weak SSG for Ace (ACES IJ), Ramayana (RALS IJ), and Matahari (MPPA IJ).
· We like basic consumption plays such as Indofood (INDF IJ), Unilever (UNVR IJ), and Gudang Garam (GGRM IJ).
· Key drivers to demand: population growth, urbanization and household formation.
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