The Indonesian bourse has been one of the best-performing in the world as investors continue to pour funds into the local stock market. Despite its sharp rise, analysts and market watchers have yet to express concerns of overheating or frothiness.
The challenge is to ensure that while the stock market continues its upward rise, the real sector follows suit. Investors should be reminded that the index reflects overall expectations of how the economy will perform during the next 12 months and beyond. It is therefore anticipating what lies ahead rather than indicating what is happening today.
The situation poses some tough questions. Can the country and the economy meet investor expectations and deliver on their promises? Will the government roll out business-friendly policies that attract investment in the real sector and will companies increase their earnings and profits through greater efficiency and innovation?
The truth is the government must deliver by building infrastructure, implementing its plan for development corridors and introducing more incentives. Corporations must also deliver by creating new, higher-paying jobs and investing in new plants and machinery. All sides must deliver on their respective ends if the index is to continue its upward path.
As we all know, though, progress does not come automatically. It will require hard work, dedication and innovative thinking. It will require overcoming hurdles and not allowing vested interests to stand in the way. The economy must also remain resilient to external shocks because investors can move their funds in the blink of an eye.
The outlook for the index and the economy look bright, but it would be a tragic mistake to take the current buoyant environment for granted.
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