Jakarta Stocks to Reach Most Expensive Levels In Three Years: Fund

Indonesian equities are set to climb to their most expensive levels in three years as faster economic growth boosts corporate earnings, according to PT First State Investments Indonesia.

The Jakarta Composite Index may rise to 17 times estimated earnings by the end of 2010 from 14.7 currently, said Laurentia Amica Darmawan, an analyst at First State, a unit of Commonwealth Bank of Australia that manages Indonesia’s fourth- biggest equity fund.

That would be the gauge’s highest price-earnings ratio since December 2007, and the highest among current valuations in Asia after Japan, according to Bloomberg data.

“If people switch their mindset from Europe to Asia there’s a potential for a rerating” of Indonesian stocks, Laurentia said. “We’re overweight on the consumer sector.”

The JCI has risen 14 percent this year, the best performer among major markets in Asia as Bank Indonesia forecasts economic growth will accelerate to 5.6 percent from 4.5 percent last year.

Gains were pared by a 5.9 percent decline on the benchmark index in May on concern the European debt crisis would dent global growth, hurting demand for Indonesian exports.

The nation has a “good” outlook due to its resources and large population, putting the nation in a favorable position to attract investment, Templeton Asset Management chairman Mark Mobius wrote on his blog on June 3.

The country’s population is the world’s fourth largest, after China, India and the United States.

Foreign investors are also returning to Indonesia, buying a net $621.4 million of the nation’s stocks this year, a 17 percent increase from the year-earlier period, according to Bloomberg.

Stocks this year also got an assist as benign inflation helped the central bank keep its benchmark interest rate at a record-low of 6.5 percent to help spur investment and spending.

Domestic consumption accounts for about two-thirds of the economy, and inflation rose by a lower-than-expected 4.16 percent last month.

PT Astra International, the country’s biggest automotive retailer, jumped 33 percent this year after posting a record profit in 2009 and reporting in May that the nation’s total motorcycle sales may climb to a record of more than 6.5 million units this year.

First State’s Laurentia recommended PT Indofood Sukses Makmur, the country’s biggest instant noodle maker, saying its valuation is attractive compared to consumer peers such as cigarette producer PT Gudang Garam and PT Unilever Indonesia.

Among commodity stocks, she prefers PT Adaro Energy, the country’s second-largest coal producer, citing rising output.

Separately, UBS’s wealth management unit said it favored stocks in emerging markets, including Indonesia, because the global economy was not expected to slip into another recession as a result of Europe’s sovereign-debt crisis.

“We don’t see a double dip scenario,” Pu Yonghao, chief Asian investment strategist at UBS Wealth Management, told Bloomberg Television in an interview in Hong Kong.

“After such a correction, valuations look extremely attractive and earnings growth remains solid and on the macro, we don’t have any sovereign-debt issues in Asia,” he said.

Rising domestic consumption will help to sustain Asia’s economic growth, Pu said. The US economy and larger nations in Europe including Germany and France are also “holding up very well,” he said.

A Federal Reserve report on Wednesday showed industrial production in the US rose 1.2 percent in May, the most since August.

Reports released last week also showed surging exports, industrial production and retail sales in China, the world’s fastest-growing major economy.

“Relatively speaking, we still like equities, particularly emerging-market equities,” UBS’s Pu said.



Bloomberg

JCI, Rupiah Strengthen as Worries Over Greece Ease

The Jakarta Composite Index and the rupiah both gained on Tuesday after European finance ministers signaled the debt crisis in Greece would not trigger excessive tightening measures across the continent.

The JCI rose 14.72 points, or 0.5 percent, to close at 2,834.18. Some 4.45 billion shares worth Rp 4.27 trillion ($469.7 million) changed hands. Gainers led decliners 119 to 71.

Leading the JCI’s gain were banking stocks, which had been considered undervalued after recent declines.

“The JCI’s gain was also supported by the rebound in commodity stocks,” said Purwoko Sartono, an analyst at PT Panin Sekuritas. However, Purwoko said the JCI would continue consolidating and in the short-term would continue to be affected by Europe’s debt worries.

The rupiah halted a two-day slide on speculation the central bank was intervening to counter exchange-rate swings that may hurt the economy. It traded at Rp 9,109 against the dollar on Tuesday at stock market close, compared to Rp 9,142 on Monday.

“Bank Indonesia is guarding the rupiah so that it isn’t volatile,” said Muhammad Fauzi Halim, a foreign-exchange trader at PT Bank Resona Perdania. “If the rupiah appreciates to 9,100, it won’t satisfy the exporters.”

“There’s some breathing space for Asian currencies for now as the bad news in Europe diminishes,” said Mohd Zaki Talib, a foreign-exchange trader at RHB Bank in Kuala Lumpur. “The market is not fully convinced that the worst for the euro is over.”

Among the gainers, PT Bank Mandiri rose 2.8 percent, PT Bank Central Asia gained 1.9 percent and PT Bank Danamon climbed 2.9 percent.

Coal miner PT Bumi Resources added 2.1 percent after it was reported that its subsidiary, PT Bumi Resources Mineral, would sell as much as 30 percent of its equity in an initial public offering in September to raise $600 million.

PT Indika Energy, Indonesia’s third-largest coal producer, jumped 5.7 percent to Rp 2,775.

Fundamentals Sound, JCI Downturn to Be Short-Lived, Observers Predict

Financial leaders, economists and analysts said they were confident the hammering the Indonesian stock market took last week would be short-lived and that the Jakarta Composite Index was unlikely to take as savage a battering as it did at the beginning of the global financial crisis.

The JCI fell by 7.8 percent last week, the biggest slump since the week ended Nov. 21, 2008, but still nowhere near the 20 percent it fell on Oct. 6 and 7, 2008, at the start of the crisis.

Markets worldwide fell significantly last week because of investor nervousness about the Greek debt crisis, while the situation was made worse in Indonesia by the shock resignation of Finance Minister Sri Mulyani Indrawati on Wednesday.

The rupiah also dropped by 1.02 percent last week, trading at Rp 9,215 against the US dollar at 4 p.m. on Friday, as investors turned to the dollar, regarded as a safe haven in troubled times.

Darmin Nasution, Bank Indonesia senior deputy governor, said a double-dip global recession was unlikely as the US economy was in better shape now and Europe was also improving.

“This is a global phenomenon, apparently caused by uncertainty about proposed solutions to the [Greek debt] crisis,” he said.

He said it was exacerbated by Wall Street’s dramatic plunge on Thursday when the Dow Jones Industrial Average dropped nearly 1,000 points in a matter of minutes.

Fuad Rachmany, chairman of the Capital Market and Financial Institutions Supervisory Agency (Bapepam-LK), said he didn’t expect a repeat of October 2008. “Recovery processes are hilly,” he said.

Farial Anwar, a director at Currency Management Group, said he didn’t think the Greek debt crisis would have as big an impact on international markets as the subprime mortgage crisis in the United States, dismissing “a big domino effect.”

The downward pressure on the rupiah is likely to ease, Farial said, adding that he expected the central bank to intervene to keep the currency trading between Rp 9,100 and Rp 9,300 against the dollar this week.

Edwin J Sebayang, head of research at PT Bhakti Securities, said the stable rupiah, positive first-quarter earnings reports and the cooling down of negative sentiments over Sri Mulyani’s departure should all combine to stop the JCI falling much more this week.

“On Monday, the index may still weaken,” Edwin said.

However, he said he expected lower prices and the continuing strong fundamentals of the Indonesian economy to result in buyers getting back into the market.

Fauzi Ichsan, an economist at Standard Chartered Bank Indonesia, said the country’s strong fundamentals, backed by foreign-currency reserves of about $78 billion compared with $50 billion in the second half of 2008, would help the economy weather the current turbulence. But he warned the government not to be complacent.

“The government should appoint a new finance minister to calm down the market, and it should actively coordinate with the International Monetary Fund and the Group of 20 leading nations on how to respond to the Greek issue,” he said. 

JCI, Rupiah Extend Losses as Investors Run for Cover Amid Global Uncertainty

May 06, 2010

Muhamad Al Azhari
Brokers at the Indonesia Stock Exchange (IDX). The JCI fell 1.3 percent on Thursday, following a drop of 3.8 percent the day before. Concern about the European debt crisis was the major driver in the sell-off. (Antara Photo)

Brokers at the Indonesia Stock Exchange (IDX). The JCI fell 1.3 percent on Thursday, following a drop of 3.8 percent the day before. Concern about the European debt crisis was the major driver in the sell-off. (Antara Photo)
JCI, Rupiah Extend Losses as Investors Run for Cover Amid Global Uncertainty

The Jakarta Composite Index fell 1.3 percent to its lowest in six weeks on Thursday and the rupiah suffered its biggest one-day loss since November as fears that the European debt crisis might derail the global recovery sent investors fleeing to safe havens. Uncertainty over who will replace Finance Minister Sri Mulyani Indrawati also added pressure.

A 50-point rally in the last hour of trading offered a glimmer of hope that the four-day sell-off was losing momentum, and some market analysts expressed confidence that Indonesia’s economic fundamentals would limit the pain for those holding domestic stocks. But there was agreement that fears of European debt contagion would be the primary driving force in the days and weeks ahead.

“The bottom line is this — as long as contagion fears continue to linger in the market [Portugal and Spain are being closely watched after Greece] investors will shy away from risky markets,” said Gundy Cahyadi, an economist at OCBC Bank in Singapore.

The JCI fell to 2,810.62, extending Wednesday’s 3.8 percent drop. Decliners outnumbered gainers 137 to 63. Volume was heavy, with 6.1 billion shares worth Rp 6.2 trillion ($675.8 million) changing hands. Foreign investors were net sellers by Rp 862 billion.

Meanwhile, the rupiah slumped 1.74 percent to 9,290 against the dollar as of 8 p.m. in Jakarta.

Bank Indonesia acting Governor Darmin Nasution, who last week said the central bank would keep the rupiah “just above the 9,000 level” offered vague assurances that Bank Indonesia would limit the currency’s volatility.

“We would intervene only if we believe its move has been too big,” he said.

Darmin said the rupiah was holding up better than some other emerging-market currencies.

News of the departure of Sri Mulyani for a senior position at the World Bank added to selling of domestic assets on Wednesday and Thursday, analysts said, but the news was not as big a factor as European debt.

“Essentially, yes the departure of Sri Mulyani might be a factor but it’s not as big a factor as what is happening in Europe,” Gundy said.

Alberto Isgut, an economist at the United Nations’ Economic and Social Commission for Asia and the Pacific, expected Sri Mulyani’s exit to have a limited affect on the market.

“This is unexpected news and I hope the short-term impact will only last about a week. But I am confident that the government will replace Sri Mulyani with someone as competent,” Alberto said. “In the long run it won’t have a strong negative effect because Indonesia has strong economic fundamentals.”

Darmin also expressed faith in the economy’s foundations on Thursday.

“At the end what determines [investor] confidence is economic fundamentals. Sentiment will always be temporary,” he said.

Darmin forecast the economy would expand by more than 5.7 percent in the second quarter.

“For the time being, there’s uncertainty in the market,” PT Ciptadana Securities head of sales John Teja told Reuters. “I believe investors will focus on fundamentals and the market will rebound.”

Among the major decliners on Thursday were PT International Nickel Indonesia, whose shares fell by 2.2 percent; fellow producer PT Aneka Tambang, down 2.3 percent; and tin miner PT Timah, whose stock dropped 3.1 percent to Rp 2,350, its lowest close since April 8.

http://www.thejakartaglobe.com/business/jci-rupiah-extend-losses-as-investors-run-for-cover-amid-global-uncertainty/373565