Preparing Your Investment Portfolio Amidst Fed's Plan for Rate Hike in March 2023

Reporter: Nur Qolbi | Editor: Hasbi Maulana

KONTAN.CO.ID - JAKARTA. The statement made by Federal Reserve Governor Jerome Powell regarding the Fed's plan to raise the benchmark interest rate by 50 basis points (bps) in March 2023 has had an impact on the global market. In Indonesia, the exchange rate of the rupiah against the US dollar has weakened above IDR 15,400.

The Composite Stock Price Index (CSPI) is also reluctant to move from the level of 6,700. If measured from the beginning of this year, the CSPI has eroded by 1.25%.

In the medium term, this era of high interest rates is predicted to lead to a slowdown in global growth.

Given this situation, CEO of Edvisor.id, Praska Putrantyo, advises investors to build a more conservative portfolio in the short to medium term, or for three to six months. Fixed-income instruments should make up a larger proportion of the portfolio, with a percentage of 50%-60%.

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Investors can choose bonds with short and medium tenors, as long-term bonds are riskier. Then, around 20% of the investor's funds can be placed in money market instruments to take advantage of higher interest rates due to the trend of rising interest rates. The remaining funds, 20%-30%, can be placed in the stock market, given its less conducive conditions.

When investing in stocks, investors can use a value investing strategy. "All stocks are prone to correction despite offering dividends and others," said Praska on Friday (10/3).

Therefore, investors need to choose stocks that have cheap valuations and positive business prospects. Leading stocks that can be chosen include those of large banks, primary consumer goods, infrastructure stocks that are public utilities, crude palm oil (CPO) stocks, and retail stocks.

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Research Analyst at PT Infovesta Kapital Advisori, Arjun Ajwani, added that investors should invest in safer assets, such as the money market and bonds. Suitable bonds to choose from are certainly liquid, such as government bonds or investment-grade corporate bonds.

For the second half of 2023, Praska said investors could slightly adjust their investment allocation by adding to their stock holdings and reducing their bond and money market holdings. The allocation for stocks could be 30%-50%, bonds 40%-50%, and the money market 10%-20%.

This is in line with the start of the political season leading up to the 2024 election year. At that moment, investors are predicted to be more aggressive. After reaching its peak in the first half of 2023, interest rates are expected to stabilize and begin to decline in 2024.

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This condition is expected to make the stock market more bullish since the end of the third quarter of 2023 and the fourth quarter of 2023.