Indonesia has never looked stronger as all factors conspire to progress the country. The only setback was the Asian tsunami that destroyed the province of Aceh. Perhaps that tragedy provided the goodwill for the recent piece settlement. The strengths of the country are:
- Highly prospective for resource exploration - which can serve as a basis for mineral & agricultural export industries
- New popular leader able to drive policy direction
- Peace agreement in Aceh which will facilitate investment
- Tax reform being adopted by the President
- Petroleum revenues helping the country to preserve its energy self-reliance
The Indonesian Archipelago is however not without its problems, the most important being:
- High levels of corruption & business
- Lack of public accountability in goverment and corporates
- Ethnic and religious tensions which divide the country and remain a basis for tension. Prior resettlement policies could incite such problems. Regional autonomy will be critical.
The Indonesian government and Acehnese rebels have reached a landmark peace agreement after 30 years of fighting. The Free Aceh Movement (GAM) has surrendered 25% of their weapons, and will surrender the balance on 31st Dec’05. The Indonesian government is responding by gradually withdrawing its troops from the province. This peace agreement will be a big boon for Indonesia.
Investment Strategy
If you are investing for the long term, you still need an investment strategy. Dont be fooled by the rhetoric of fund managers. The reason they advise you to 'buy & hold' is because they dont want to compete with you in sell-offs. Markets and industrial sectors are cyclical, so they demand trading to get the best returns. Fund managers actually cant hope to match the performance of small investors (if you are half good) because they have to manage huge amounts of funds and charge you a fee besides.
MY ADVICE is (i) look at a range of market indices and decide upon what level of correction would give you the justification you need to get in & out of the market. It might be a 5-10% retracement or a break of trend. (ii) Diversify if you dont have an intimate knowledge of the company or management. More than 30% in one company is aggressive.
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