Nomura Equity Research said it expects the Indonesian market to perform "relatively well" amid a global economic slowdown on the back of strong macroeconomic fundamentals, prudent monetary policy and tough fiscal discipline.
Nomura's head of equity Wilianto Ie said a rise in purchasing power and economic growth will lead to enlarged market size and an increase in foreign direct investment will be followed by rising competition.
"We anticipate competition to intensify in the coming years and prefer companies with strong brand equity, upcoming market share winners, and industries with high entry barriers," he said.
Nomura is bullish on the infrastructure and discretionary consumer sectors, while it is 'neutral' on banks, telecom and property sectors. However, it is 'underweight' on consumer staples, metal and mining sectors.
The research house's top picks include automotive producer Astra International Tbk, state-controlled lenders Bank Rakyat Indonesia Tbk and Bank Mandiri Tbk, cigarette maker Gudang Garam Tbk and toll operator Jasa Marga.
"We expect resilient domestic consumption, subdued inflation and good results will send the Jakarta Composite Index into another upward rally in coming years," the brokerage said.
The Indonesian index was up 0.07 percent.
1209 (0509 GMT) (Reporting by Andjarsari Paramaditha; Editing by Anand Basu)