Global Recession 2023

Technowikia.com – The International Monetary Fund (IMF) has indicated that several countries in the world, such as the United States, Europe and China. Will experience the deepest economic divisions, and even have the potential to enter into a recession in 2023. However, investors can still look for potential profit from investments in this sector. And the right asset class using the right strategy.

The IMF in its report (11/10/2022) stated that developed countries that have the potential to be hit by a recession account for around a third of the global economy, so the impact will be widespread. For information, theoretically a recession is a decline in the economy for two consecutive quarters. An economic recession can trigger a decrease in company profits, increase unemployment, and even economic bankruptcy.

This recession began with a crisis, namely the country’s economy which experienced a drastic decline. According to Indonesia’s point of view, at least there have been several crises that have occurred, namely the 1998 crisis, the 2008, 2013 and 2020 crises. How severe will the future crisis be?

Budi Hikmat, Chief Economist of PT Bahana TCW Investment Management, explained that the 2022 crisis is marked by two things. First, the central bank raises interest rates to deal with out-of-control inflation. Second, this crisis is also caused by geopolitical tensions.

“Russia-Ukraine tensions in Europe are just an afterimage. The main thing will be between China and the United States, there are already signs,” said Budi when met by Bareksa, (18/10/2022). The impact of this crisis has been seen from the increase in bond yields, due to the tightening of the US Central Bank The Fed. As previously reported, the Fed has raised interest rates 5 times this year, which is the fastest tightening in history.

The increase in bond yields triggered a financial crisis in England that reached a recession. This is because the position of the UK’s national debt is already high and the tax rate in that country is also high, burdening the public.

Cash Opportunity

So, with this condition, how do you look for opportunities to profit from investment returns? Budi explained that investors need to have a reference for money.

For example, by looking at the current yield (yield) of Government Securities (SBN). For a reference tenor of 10 years, Indonesia’s SBN yield is already in the range of 7.4-7.5%. Foreign investors have already left with funds of more than IDR 100 trillion due to their focus on assets in the US.

This is an opportunity to buy SBN at a low price. Or, it could be a reference for investors if holding a 10-year tenor SBN can get a yield of up to 7.4% per year. Compare that to house or property rent, deposits and inflation.

“The 7.4% yield is good, it is a reference for profit,” said Budi.

Besides that, continued Budi, currently the dollar is strengthening because investors are focusing on the US. Thus, companies that benefit are those who become exporters, alias receive income in dollars.

An example of a company or issuer that benefits from this condition is a coal exporter such as PT Bukit Asam Tbk (PTBA). “Check that the coal company has cash, calculate how much cash per share. If the number is large, the potential for paying large dividends is an example of PTBA which can distribute 100% of dividends from profits,” explained Budi.

Not only in terms of asset selection, investors can also earn profit by adopting the strategy of pricing the value. That is, investors need to be able to assess the valuation of an investment asset.

For example, investors can take the average valuation or target price of a stock from several analysts. If, for example, it is estimated that the stock can increase by 20% in the next 12 months, investors can set a margin of safety of around 10%.

So, if the share price has risen 10%, there is no need to wait until it reaches the 20% increase target, investors can already sell it. From here, of course investors can already take profit (take profit). Because they already have a reference for money, including in mutual fund investments

Sector has decreased

During a recession, he explained, these sectors will move in three conditions, namely cyclical, defensive, and stable or stagnant. “Cyclical is very sensitive to the economy, so if the economy goes up, it goes up, if it goes down, it goes down,” he explained. According to him, the property sector will clearly fall into this category or experience a price drop. Because property is not a priority need in times of recession. “I think transportation and logistics are also cyclical, moreover investment products are likely to decline,” he said.

Sectors that rose during a recession

Meanwhile, Eddy said several sectors will also be on the defensive during a recession. These sectors are predict to experience an increase during a recession, such as raw goods and primary consumers. “Then energy is also likely to increase, health too,” said Eddy.

Sector that tends to stable

Eddy explained, during a recession, the industrial sector will remain stable, even tending to decline during a recession. In addition, the non-primary consumer, technology and infrastructure sectors will also remain stagnant, as they are quite strong.