built to perform

Market Outlook 2023

Getting Ready for Take Off

October 2023
By John D. Rachmat
Senior Advisor & Independent Commissioner
December 2020

PRIVATE & CONFIDENTIAL

The KEY Issues
Global and Indonesian Arena

Indonesian Fundamentals Strong

◼ Indonesia Trade Surplus
◼ Indonesia Inflation
◼ Indonesia Real GDP Growth / PMI
◼ Indonesia Earnings Growth
◼ Indonesia Government Budget

Why is JCI so lackluster ?

◼ Flow Analysis

Short Term Risk

◼ US Fed Funds Rate

Positive Longer Term Outlook

◼ Inflation already contained
◼ UU P2SK
Source: Investing.com, as of 9 Nov 2023, 10:40 Jakarta Time
John Rachmat
Senior Advisor & Independent Chairman

Mr. John Daniel Rachmat serves as Principal and Chief Strategist at Pinnacle
Investment Indonesia.

Previously, Mr Rachmat served as the Head of Investment and Research at

Mandiri Investment Management Singapore. Before MIMS, John was the
Head of Equity Research and Strategy at PT Mandiri Sekuritas (2012 - 2016).

Prior to this, he served as an Assistant Director and Regional Analyst at RBS

Asia Securities Singapore, where he covered the ASEAN consumer, media,
plantation and transportation sectors at the firm. Earlier, Mr. Rachmat has
served at a number of stock broking companies and investment banks,
including ABN Amro Asia Securities Indonesia, Indosuez WI Carr Securities
Indonesia, Schroders Indonesia and Morgan Grenfell Asia Indonesia. He was
Independent Commissioner at PT Holcim Indonesia Tbk from March 2010 to
Feb 2019.

Mr. Rachmat is a qualified Chartered Accountant at Stoy Hayward, London.

He earned a Master of Business Administration (MBA) from the London
Business School and a Bachelor of Science degree (BSc) in Economics from
the London School of Economics and Political Science with First Class
Honours.

3
Indonesia’s Fundamentals are Strong
Indonesia Trade Surplus: the KEY to IDR and JCI strength

Source: www.tradingeconomics.com, as of Sep 2023

5
Both CPO and Coal prices are starting to weaken

500 9000

450 8000

400
7000

350
6000

300
5000

MYR/ton
USD/ton

250

4000
200

3000
150

2000
100

50 1000

0 0
Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 Dec-21 Dec-22

Coal Price (LHS) CPO Price (RHS)

Source: Bloomberg, as of 7 November 2023

6
Copper and Nickel prices are starting to weaken

500 50000

480
45000
460

440 40000

420
US cents/lb

35000

USD/ton
400

30000
380

360 25000

340
20000
320

300 15000

Copper Price (LHS) Nickel Price (RHS)

Source: Bloomberg, as of 7 November 2023

7
Bank of Indonesia Policy Rate and Inflation

Bank Indonesia Policy Rate vs CPI Inflation

Inflation is measured on YoY basis
9.00%

8.00%

7.00%

6.00%

5.00%

4.00%

3.00%

2.00%

1.00%

0.00%

Interest Rate CPI Inflation Core CPI Inflation

Source: Bloomberg, as of October 2023

8
Indonesia CPI and PPI

Indonesia Consumer and Producer Price Index

Year-on-Year Change
16%

14%

12%

10%

8%

6%

4%

2%

0%

PPI CPI

Source: Bloomberg, as of October 2023

9
Indonesia Real GDP Growth
2017 - 2023

8.00%
7.07%

5.73%
6.00% 5.46%
5.27%5.17%5.18%
5.01%5.01%5.06%5.19%5.07% 5.06%5.05%5.01%4.96% 5.02%5.02% 5.01%5.03%5.17%4.94%

4.00% 3.51%
2.97%

2.00%

0.00% -0.70%

-2.17%
-2.00%

-3.49%

-4.00%

-5.32%

-6.00%
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23

Source: www.bps.go.id
10
Indonesia Economy Composition and Real Growth Rates

Source: www.bps.go.id
11
Indonesia’s Banking Credits start to grow again

Source: www.tradingeconomics.com, as of October 2023

12
EPS Growth is Improving
Companies in Pinnacle Universe

Source: Bloomberg, Pinnacle Research

13
Indonesia’s PMI remains resilient

Indonesia PMI and Interest Rate

60 6.5

55
6

50
5.5

45
5

40

4.5
35

4
30

3.5
25

20 3

Manufacturing PMI (LHS) BI 7 Day Reverse Repo Rate (RHS)

Source: Bloomberg, as of October 2023

14
Indonesia’s PMI is one of the best in the world in 2023
Expanding (above 50) and accelerating

Source: Trading Economics and Mandiri Sekuritas

15
Why is JCI so lackluster ?
JCI coming back to the previous HIGH in Feb 2018 level

Source: www.tradingview.com, as at close of 8 Nov 2023

17
FLOW Analysis

WHO are the players in Indonesian Stock Market ?

◼ Foreign Institutions
◼ Domestic Institutions
◼ BPJS TK
◼ Retail Investors / Traders
◼ Bandar

18
Causing Losses to State = Criminal Corruption

Source: UU No 31 Tahun 1999 dan UU No 1 Tahun 2023

19
Total investment in Pension Funds Continues to Grow
The Portion of Bonds Continues to Increase

Source: OJK and Mandiri Sekuritas

UU P2SK a strong catalyst for IHSG

Source: UU No 4 Tahun 2023

21
World Equities
JCI is enjoying a Change of Fortune

31 Oct 2023 Dec 2017 –

2017 2018 2019 2020 2021 2022
(YTD) Oct 2023

S&P 500 Index (USD) 19.42% -6.24% 28.88% 16.26% 26.89% -19.44% 9.23% 56.86%

Nasdaq (USD) 31.52% -1.04% 37.96% 47.58% 26.63% -32.97% 31.72% 125.28%

China A50 Index (CNY) 32.35% -21.28% 38.47% 23.10% -11.34% -17.16% -7.79% -9.13%

Nikkei 225 Index (JPY) 19.10% -12.08% 18.20% 16.01% 4.91% -9.37% 18.26% 35.55%

KOSPI (KRW) 21.76% -17.28% 7.67% 30.75% 3.63% -24.89% 1.86% -7.68%

TAIEX (Taiwan) (TWD) 15.01% -8.60% 23.33% 22.80% 23.66% -22.40% 13.18% 50.35%

MSCI Emerging Market 34.35% -16.63% 15.42% 15.84% -4.59% -22.37% -4.31% -21.00%

SET (Thailand) (THB) 13.66% -10.82% 1.02% -8.26% 14.37% 0.67% -17.19% -21.21%

JCI (IDR) 19.99% -2.54% 1.70% -5.09% 10.08% 4.09% -1.44% 6.24%

KLCI (MYR) 9.45% -5.91% -6.02% 2.42% -3.67% -4.60% -3.57% -19.74%

Source: Bloomberg
22
Indonesian Equities NOT attractive for long term holding by foreign investors
US Equity Market Outperforms Indonesian Index in the long term

25

20

15

10

SPX Total Return Index (USD) JCI Total Return Index (USD)

Source: Bloomberg, as of 7 November 2023

•23
 120
140
160
180
220
240

100
200
Dec-15
Feb-16
Apr-16
Jun-16
Aug-16
Oct-16
Dec-16
Feb-17
Apr-17
Jun-17
Aug-17
Oct-17
Dec-17
Feb-18
Apr-18
Jun-18
Aug-18
Oct-18
Dec-18

Source: Bloomberg, as of 7 November 2023

Feb-19
Apr-19
Jun-19
Aug-19

MSCI Asia Pacific Index (LHS)

Oct-19
Dec-19
Feb-20
Apr-20
Jun-20
Aug-20
Oct-20
Dec-20
Feb-21
MSCI Asia Pacific Index vs Inverted US Dollar Index

Apr-21
Jun-21
Aug-21
Oct-21
US Dollar Index Inverse (RHS)

Dec-21
Feb-22
Apr-22
Jun-22
Aug-22
Oct-22
Dec-22
Feb-23
Apr-23
Jun-23
Aug-23
Oct-23
24
0.008
0.008
0.009
0.009
0.010
0.010
0.011
0.011
0.012
Indonesia’s Weight in FTSE Indices

Indonesia's weight in FTSE Indices

Weights are calculated monthly, July 2003 - Oct 2023
3.50%

3.00%

2.50%

2.00%

1.50%

1.00%

0.50%

0.00%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

FTSE Asia Pacific FTSE Asia Pacific (ex Japan)

Source: FTSE, Pinnacle Research. As of 14 November 2023

25
2023 : A Year of Global Recession ?
 Global Exports are Falling Steeply

YoY Growth Exports Value (USD Billions)

Countries
Jun-23 Jul-23 Aug-23 Jun-23 Jun-22 Jul-23 Jul-22 Aug-23 Aug-22

Japan -4.57% -4.52% -5.04% 724.8 759.5 722.6 756.8 718.2 756.3

China -1.62% -4.21% -5.46% 3497.3 3554.8 3450.4 3601.9 3423.1 3620.7

South Korea -7.46% -9.49% -10.60% 640.2 691.8 630.5 696.6 625.8 700

Taiwan -10.51% -12.41% -13.16% 435.2 486.3 430.6 491.6 427.6 492.4

Vietnam -1.44% -2.54% -4.74% 349.2 354.3 348.5 357.6 347.5 364.8

Singapore -1.87% -4.95% -7.50% 488.9 498.2 482.2 507.3 476.1 514.7

Indonesia 3.56% -0.40% -4.82% 279.4 269.8 274.8 275.9 268.8 282.4

India -7.29% -9.24% -10.51% 414.8 447.4 408.7 450.3 406.2 453.9

Germany 1.33% 2.08% 1.68% 1688.6 1666.4 1696.2 1661.6 1698.9 1670.8

Source: Bloomberg, as of August 2023

27
US Real GDP Growth (YoY) and Recessions (QoQ)

US Real GDP Growth YoY Change

Shaded areas indicate US recessions
15.0%

10.0%

5.0%

0.0%

-5.0%

-10.0%

Source: Bloomberg
28
US Recessions vs S&P 500 index

S&P 500 Index (log scale)

Shaded areas indicate US recessions
10000

1000

100

10
79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23

Source: Bloomberg, as of October 2023

29
The Fed's Dilemma
This never-fail indicator (since 1950) has flashed leading signal for recession

Source: www.fred.stlouisfed.org, as of 7 November 2023

30
US Economy Composition and Real Growth Rates

Source: www.bea.gov
31
Will the Fed Tighten into a Recession ?

Source: www.tradingview.com, as of September 2023

32
China PMIs are losing momentum
Post Covid bounce is losing steam in China

60

58

56

54

52

50

48

46

44

42

40

Manufacturing Non-Manufacturing

Source: IMF and Bloomberg, as of October 2023

33
FDI into China turned negative

34
Inflation – Slowing Down but Fast Enough ?
US Consumer Price Index vs Producers Price Index

US Consumer and Producer Price Index

Year-on-Year Change
14.0%

12.0%

10.0%

8.0%

6.0%

4.0%

2.0%

0.0%

-2.0%

-4.0%

PPI CPI

Source: Bloomberg, as of September 2023

36
Market has cooled down on Israel vs Hamas

37
WTI Crude Oil Price: Which direction next?

140

120

100

80

60
USD/barrel

40

20

-20

-40

-60
Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Dec-22 Mar-23 Jun-23 Sep-23

Source: Bloomberg, as of 7 November 2023

38
The US Dollar and Oil Price: Changing Tides

160 120

140

110
120

100

100
80
USD/Barrel

60
90
40

20
80

-20
70

-40

-60 60

Oil Price (LHS) Dollar Index (RHS)

Source: Bloomberg, as of 7 November 2023

39
The Federal Reserve Balance Sheet
QE does NOT cause rising inflation

10000 10%

9000
8%

8000

6%
7000

6000
4%
USD Billion

5000

2%
4000

3000
0%

2000

-2%
1000

0 -4%

US Recession The Fed Balance Sheet (LHS) US CPI YoY Change (RHS)

Source: Bloomberg, as of 31 October 2023

40
The Federal Reserve Balance Sheet
Should we FEAR taper ?

10000 6000

9000

5000
8000

7000
4000

6000
USD Billion

5000 3000

4000

2000
3000

2000
1000

1000

0 0

The Fed Balance Sheet (LHS) S&P 500 (RHS)

Source: Bloomberg, as of 31 October 2023

41
Market Forecasts at 7 Nov 2023

Current FFR target range: 525 – 550 basis points

Meeting Date 3 - 3.25 3.25 – 3.5 3.5 – 3.75 3.75 – 4 4 – 4.25 4.25 – 4.5 4.5 – 4.75 4.75 – 5 5 – 5.25 5.25 – 5.5 5.5 – 5.75 5.75 – 6

13-Dec-23 90.2% 9.8%

31-Jan-24 84.6% 14.8% 0.6%

20-Mar-24 22.0% 66.4% 11.1% 0.5%

1-May-24 10.1% 42.4% 41.0% 6.2% 0.2%

12-Jun-24 6.1% 29.5% 41.6% 20.1% 2.6% 0.1%

31-Jul-24 3.8% 20.6% 37.0% 28.3% 9.3% 1.0%

18-Sep-24 2.4% 14.5% 31.1% 31.4% 16.1% 4.0% 0.4%

7-Nov-24 1.3% 8.8% 23.2% 31.2% 23.4% 9.8% 2.1% 0.2%

18-Dec-24 0.8% 6.2% 18.2% 28.5% 26.1% 14.5% 4.7% 0.9% 0.1%

Source: CME
42
US Unemployment vs S&P 500 index

6000 14.00%

12.00%
5000

10.00%
4000

8.00%

3000

6.00%

2000
4.00%

1000
2.00%

0 0.00%

S&P 500 (LHS) US Unemployment Rate (RHS) 16-Month Average of US Unemployment Rate (RHS)

Source: Bloomberg, as of October 2023

43
How January fares may affect FY 2023 performance

Santa Claus Previous Year Full Year

Year First 5 Days January Return
Rally Return Return

1954 1.7% 0.5% 5.1% -6.6% 45.0%

1958 3.5% 2.5% 4.3% -14.3% 38.1%

1961 1.7% 1.2% 6.3% -3.0% 23.1%

1963 1.7% 2.6% 4.9% -11.8% 18.9%

1975 7.2% 2.2% 12.3% -29.7% 31.5%

1995 0.2% 0.3% 2.4% -1.5% 34.1%

2012 1.9% 1.8% 4.4% 0.0% 13.4%

2019 1.3% 2.7% 7.9% -6.2% 28.9%

2023 0.8% 1.4% 6.18% -19.4% ?

Source: Bloomberg
44
Pinnacle Investment Bond Outlook
 2%
4%
6%
8%

0%
10%
12%
Dec-13
Mar-14
Jun-14
Sep-14
Dec-14
Mar-15
Jun-15
Sep-15
Dec-15
Mar-16
Jun-16
Sep-16
Dec-16
Mar-17
Jun-17

Source: Bloomberg, as of 7 November 2023

Sep-17
Dec-17
Mar-18

US 10Y Treasury Yield

Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
Jun-20
US Treasury vs Indonesia Gov Benchmark Bond Yields

Sep-20
Indonesia Gov 10Y Bond Yield

Dec-20
Mar-21
Jun-21
Sep-21
Dec-21
Mar-22
Jun-22
Sep-22
Dec-22
Mar-23
Jun-23
Sep-23
46
Net Capital Inflow/(Outflow) in Government Bond Market

47
Indonesia Government Budget Deficit Beating Expectations

Source: Ministry of Finance

48
2023 Gross Bond Issuance is Likely Much Reduced

Source: DMO and Mandiri Sekuritas

49
Burden Sharing Scheme is no Longer Available in 2023

Source: Bank Indonesia, Ministry of Finance and Mandiri Sekuritas

50
Performance
Pinnacle FTSE Indonesia Index ETF [XPFT]

40%

30%

20%

10%

0%

-10%

-20%

-30%

-40%

-50%
Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Dec-22 Mar-23 Jun-23 Sep-23

FTSE Indonesia JCI MSCI Indonesia LQ45 IDX30 XPFT

Cumulative Return 1 Month 6 Month 1 Year Since Inception

XPFT / Pinnacle FTSE Indonesia Index ETF -5.81% -6.13% -6.63% 18.08%

FTSE Indonesia -5.81% -6.83% -8.98% 9.80%

JCI -2.70% -2.36% -4.88% 15.39%

LQ45 -6.33% -7.22% -12.01% -3.71%

IDX30 -6.92% -8.35% -13.83% -9.47%

MSCI Indonesia -5.85% -8.62% -9.02% 7.19%

As of 31 October 2023
51
Performance
Pinnacle Strategic Equity Fund [PINNSEF]

80%

60%

40%

20%

0%

-20%

-40%

FTSE Indonesia JCI MSCI Indonesia LQ45 IDX30 PINNSEF

Cumulative Return 1 Month 6 Month 1 Year Since Inception

PINNSEF / Pinnacle Strategic Equity Fund -5.72% -2.51% -8.85% 51.67%

FTSE Indonesia -5.81% -6.83% -8.98% 9.80%

JCI -2.70% -2.36% -4.88% 15.39%

LQ45 -6.33% -7.22% -12.01% -3.71%

IDX30 -6.92% -8.35% -13.83% -9.47%

MSCI Indonesia -5.85% -8.62% -9.02% 7.19%

As of 31 October 2023
52
Performance
Pinnacle Indonesia Bond Fund [PIBF]

60%

50%

40%

30%

20%

10%

0%

-10%
Nov-16 May-17 Nov-17 May-18 Nov-18 May-19 Nov-19 May-20 Nov-20 May-21 Nov-21 May-22 Nov-22 May-23

PIBF IGBI

Cumulative Return 1 Month 6 Month 1 Year Since Inception

PIBF / Pinnacle Indonesia Bond Fund -1.12% -0.96% 4.82% 46.91%

IGBI -0.83% 0.13% 5.51% 47.68%

As of 31 October 2023
53
Performance
Pinnacle Indonesia Bond Fund [PIBF]
50%

45%

40%

35%

30%

25%

20%

15%

10%

5%

0%

PMMF IRDPU IDRE1MO

Cumulative Return 1 Month 6 Month 1 Year Since Inception

PMMF / Pinnacle Money Market Fund 0.47% 2.47% 4.70% 45.16%

IRDPU 0.33% 2.04% 3.90% 32.64%
IDR1EMO 0.27% 1.51% 2.94% 31.01%

As of 31 October 2023
54
About Pinnacle Investment
 Leadership
Global Expertise & Strong Local Knowledge

Dr. Rinaldi Firmansyah, CFA John D. Rachmat Guntur S. Putra Andri Yauhari, CFA Indra M. Firmansyah
Chairman Independent Commisioner Co-Founder & CEO Co-Founder & CIO Senior Advisor
President Director Managing Director
Chairman PT Blue Bird Tbk Independent Commissioner
PT Holcim Indonesia Tbk
(2010-2019)

Previously: Previously: Previously: Previously: Previously:

• CEO, CFO Telkom Tbk. • Mandiri Investasi (SG) • Ares Capital • Ares Capital • PWC
• CEO Bahana Sekuritas • Mandiri Sekuritas • Blackrock (New York) • Deutsche Bank (New York) • Eagle Capital
• Citigroup • RBS (SG) • Credit Suisse (New York) • JP Morgan (New York) • UBS
• Chairman PT Telkom Tbk • ABN Amro • Credit Suisse
• Chairman PT Semen Gresik Tbk • Schroders 3

Doctor of Philosophy in Management

Padjajaran University
M.B.A
IPMI Business School
B.Eng in Electrical Engineering
Institute of Technology Bandung
M.B.A M.S in Financial Engineering M.S in Financial Engineering M.B.A
London Business School Univ of Michigan, Ann Arbor Univ of California, Berkeley Bentley University
B.S in Economics B.S in Computer Science B.S in Chemical Engineering B.S in Finance & Accounting
London School of Economics Arizona State Univ, Tempe University of Wisconsin, Madison Univ of San Francisco

56
Building
Indonesian’s Next Generation Asset Manager

Traditional Next Generation

α
Active Investing ETFs
Fundamental Passive Investing
Insider Information Big Data / Data Driven
Macro Trends Quantitative Approach
Asset Allocations
Business Strategy
Analytics
Qualitative Aspect Machine Learning

“
The future success for alpha generation will depend more on the ability to
leverage passive investing, innovative data and disruptive technology in the
investment process.

57
 Quantitative Research
Investment Engineering Group

Alpha Researcher
1 Responsible to conduct research for alpha factors and
signals using various scientific and quantitative
techniques. Manage all aspects of alpha research
process, including signal/factor discovery and back-
testing

2 Portfolio Risk & Optimization

Responsible to conduct research in portfolio
construction techniques, asset allocation model,
Investment and improve portfolio optimization model across
Engineering all investment funds.

Group Data Science & Engineering

Responsible to run data-driven initiative to optimize
investment decision making by applying
3 advanced quantitative, machine learning, and
statistical analysis of large datasets (big data) to
identify trends, patterns that can be use to
improve our investment process
Quantitative Research
From the very beginning
4 Investment Research Specialist
Responsible to perform as a support functions to all
quantitative researcher and liaise between IEG and
other departments

58
Global & Domestic
Recognition

“Rising Star Investment Manager”

“Disruptive & Innovative”
“High Caliber of Investment Talent”
“Pinnacle is a Technology Firm”
“Focus on Sophisticated Risk Mgmt”

59
Achievements
Nomination & Awards

Pinnacle Strategic Equity Fund Pinnacle Sharia JII Tracker Index

INVESTOR AWARD Bloomberg-APRDI KONTAN BAREKSA KONTAN BAREKSA

Best Fund Award Best Equity Fund Best Equity Fund Best Index ETF Fund
Nomination 2017 Nomination 2017 GOLD Winner 2017 Rank #1 2020
Rank # 2 Equity Fund Rank # 2 Equity Fund Rank # 1 Equity Fund Rank # 1 Index Fund
1 Yr Category AUM <100B 1 Yr Category AUM <100B 1 Yr Category AUM <100B 1 Yr Category AUM

KONTAN INVESTOR AWARD

Champion Best Equity Fund
Equity Fund Best Equity Fund 2018
2018 Rank # 1 Equity Fund
3 Yr Category 2018 – 3 Years 3 Yr Category AUM <500B

Pinnacle Money Market Fund

INVESTOR AWARD Kontan Bareksa KONTAN INVESTOR AWARD INVESTOR AWARD

Best Money Market Fund Best Money Market Champion Best Sharia Money Best Money Market Fund
2018 Asset Manager Market Fund 2019 2020
Money Market
1 yr Performance – 2017 GOLD Winner 2018 1 yr Performance – 2018 3 yr Performance – 2019
Fund 2018
Category AUM <100B AUM <500B IDR Category AUM <100B Category AUM < 500B
1 Yr Category

60
 Indonesia Sales Contacts
Walman Hutagaol
Institutional Marketing Manager
+62 21 5790 7500
walman.hutagaol@pinnacleinvestment.co.id

Thank You Gerti Sarah R

Institutional Marketing Manager
+62 21 5790 7500
gerti.sarah@pinnacleinvestment.co.id

OFFICE ADDRESS
Capital Place 41F
Jl Gatot Subroto Kav 18
Jakarta – 12710 – Indonesia
www.pinnacle.id