The year 2003 was a very good year for investors. Compared to 2002, when concerns about corporate accounts and misbehavior decreased investment, in 2003 investors became far less risk averse, sought high return assets and poured money back into capital markets around the world. Bonds had their biggest rallies in history, spurred on by rising share prices and less price volatility. The yields from the high yield bond market shrunk considerably. After three years of declines, money flowed into world equities, which had their best performance for 17 years, the Dow Jones, Nasdaq and FTSE rose 21%, 45% and 12% respectively. Asian stock markets performed even better, with Japan, Thailand, Singapore and Hong Kong, rising 22.5%, 120%, 32% and 34%, respectively.

Following several bankruptcies of large established companies in 2002, in 2003 strong corporate profits and better balance sheets and most importantly the unexpectedly strong recovery of the US economy, which grew on the back of tax cuts, low interest rates and a weaker dollar, encouraged investors, especially foreign investors, to return to global markets. Financial markets rose in Europe and Japan, despite more sluggish economic performances.

Emerging markets, in particular, benefited from the huge increase in investment. In dollar terms they rose by half, largely due to good economic growth and outlook. Stronger currencies, lower interest rates and inflation supported increased consumer buying. Foreign investors were attracted to the Southeast Asian markets as they were still well below their pre-crisis peaks, and valuations were mostly lower than historic averages. As well, China, which attracted huge FDI inflows as GDP grew 9.1% in 2003, was seen as an engine of growth for the region in terms of a market and also a source of investment.

The Jakarta Stock Exchange (JSX) performed very well in 2003, taking the second spot in Asia, and rose 69% compared to 11% in 2002. The rise was largely due to inexpensive shares and the positive outlook of the Indonesian economy, after several years of difficulties, which grew around 4% amid a stable and stronger Rupiah, lower interest rates and inflation and a better social and political climate.

The year 2003 was also a strong year for mining companies around the world. Increased commodity prices drew investors’ attention. Antam’s main commodities of gold and nickel both had significant increases with nickel reaching a 14 year high at the end of the year largely due to Chinese demand and gold increasing due to geopolitical security concerns and a depreciating US dollar.

The outlook for equity in Southeast Asia is good as domestic savings have grown since the crisis and with interest rates so low it is likely consumption or investment by Asians will increase. As investors question the sustainability of a US recovery due to the current account deficit, the dependence on consumer spending, a lack of saving and corporations with lots of debt, foreign investors may turn to Asia, looking for good value and as a hedge to US equities.

PT ANTAM Tbk
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