There seems to be a causal relationship between elections and the strong performance of consumer goods companies in Indonesia. For example, in the years 2004, 2009 and 2014 (when legislative and presidential elections were held), the consumer goods index (containing all consumer goods companies that are listed on the Indonesia Stock Exchange) expanded by 11.44 percent (y/y), 105.39 percent (y/y) and 22.21 percent (y/y), respectively.

Another interesting fact is that the consumer goods index surged 82.73 percent over the past five years, setting a better performance than the benchmark Jakarta Composite Index that "only" rose 47.23 percent over the same period. This shows that - without the presence of elections - consumer companies are (generally) doing great in Indonesia.

Ahead of elections, when politicians and political parties are busy campaigning, the rotation of money increases significantly in Indonesian society, which translates to strengthening consumption of various goods, including food and drinks. Kiswoyo Adi Joe, analyst at Recapital Asset Management, said an additional IDR 50 trillion (approx. USD $3.7 billion) may be injected into Indonesian society during the elections in 2018 and 2019. Part will go into consumer goods.

Another factor that is set to impact positively on the performance of consumer goods companies in 2018 is rising optimism about Indonesia's economic growth. Most people expect to see accelerating economic growth for Indonesia in 2018, although the government's 5.4 percent (y/y) growth target may be a bit too ambitious. Accelerating economic growth gives rise to strengthening purchasing power, hence people consume more products and services.

Meanwhile, Bank Indonesia's Consumer Confidence Index rose to a reading of 126.4 points in December 2017, up from 122.1 in the preceding month. Bank Indonesia, the central bank of Indonesia, attributed the strengthening consumer confidence index to people's improving perceptions of the Indonesian economy.

If consumer goods companies are great stock picks for the next two years, which companies, exactly, have the strength to tap the potential amid these elections? Kiswoyo Adi Joe recommends the following companies: Nippon Indosari Corpindo, Indofood CBP Sukses Makmur, Indofood Sukses Makmur, Unilever Indonesia, and Mayora Indah.

Meanwhile, Marolop Alfred Nainggolan, Head of Research at Koneksi Kapital, expects - besides food and drinks companies - tobacco companies to have a great year as well due to the elections. Overall, consumer companies should be able to deliver double-digit growth, he said. Nainggolan recommends shares of Unilever Indonesia, Indofood CBP Sukses Makmur, and Gudang Garam.