Market Insight

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 – China Trade War, Should Indonesian Stock Market Worry?

by Biyan Iskandar – Hoki Hoki Bento  Capital

July 6th  2018, US declared the first wave tariffs on $34 billion in Chinese goods. Nearly a third of Chinese import goods to the United States could be affected by tariffs in coming months. China immediately responded with “defensive” countermeasure by also putting tariffs on imported goods from the US. This also marks the start of trade wars between the US and China.

 

 

Indonesia economies itself is more sensitive to China’s economy than the US. One of Indonesian Economist from Mandiri Bank said that for every 1% change in China’s economy, Indonesia will also have a 0.09% change in the economy. While towards the US, Indonesia economy changes 0.07% every 1% US economy change. Moreover, The International Monetary Fund says an escalation of the tit-for-tat tariffs could shave 0.5% off global growth by 2020.

The fact that Indonesia has been seen as complements to the other emerging economies since Indonesia consumers are more domestic-demand oriented, with a large population and rising middle class, which offers an investment-grade product. As Indonesia is one the emerging economies country, Indonesia is also affected the most by trade wars.

The Central Bank of Indonesia, Bank Indonesia raised its policy rate to 5.25% percent in May and June counter the falling rupiah and stock price. The most visible impact is from the SBN market, many foreign investors take their money out of the market. Right now Indonesia’s property industry stocks are nearing the possible lowest price, so investors should hold their decision and wait for the stocks to go lower and buy.

 

 

 

 

Rupiah is getting weaker, which sectors is getting better?

by Erlin Anggreani  Riadi  – BerCuanda Aja Investment

Of course, it is still fresh in our minds about the hectic news of the weakening Rupiah exchange rate that passed Rp. 15,000 – since last month. Various opinions expressed by various parties related to the positive and negative effects of the weakening of the rupiah against the USD, in terms of economy, business, even political issues. Not only that, it certainly creates certain reactions in the stock market. As traders and investors in the stock market, we should be sensitive to these events and what effects they can affect our portfolio.

With the weakening of the rupiah exchange rate, of course, we understand that export goods are more affordable in the international market. Thus we can draw the conclusion that the sale of Indonesian export goods will increase at the moment in the international market, this is a good signal that we are looking forward to. Therefore the weakening of the rupiah can be a positive thing for those of us who invest in companies that sell export goods because their income is predicted to rise significantly.

So what are the sectors that must be hunted right now? As we all know that the oil and gas sector and the mining sector are still one of Indonesia’s largest exports, so we can start looking for oil, gas, and mining sector companies that have good prospects within the timeframe we expect. In addition, the textile industry is also seen experiencing price increases as the rupiah weakens given that textile is also one of Indonesia’s export products. Not only those two sectors, but we can also look at the plantation and fisheries sectors because forestry products and shrimp can still be said to be Indonesia’s largest export commodity.

But we also need to be careful in taking action at times like this because the movement of exchange rates is difficult to predict, we do not know for certain until when these sectors have good prospects for investors. We must also be aware of the strengthening of the rupiah exchange rate because it can significantly affect these export companies, therefore portfolio diversification is highly recommended to minimize the risk of stock price movements from the sector given the sectors mentioned above are quite sensitive to the movement rupiah exchange rate.

Democrat Takes Over Capitol Hill, Should Indonesian Investors Worry?

by Geraldine Hizkia Tanuwijaya  – Team P-All Right Investment

Friday, November 9th, 2018. The United States of America had just held the mid-term election in order to elect the senators and the house of representative or usually called Capitol Hill. The election is between two of the most representative party in the United States of America which are Republicans vs Democrats. Republicans which are attributed with red color and Democrats which are attributed with blue color have been the most intriguing issue in the United States of America as they always compete for a political position in the country. As we have already known, the presidential election held in 2016 was also Republican against Democratic which in Republican side is represented by Donald Trump and Democratic side is represented by Hillary Clinton and Bernie Sanders which eventually won by Donald Trump from Republican. Now, they have to compete again in order to determine the senates for the United States Congress and the house of representative for legislative of United States of America. The house of representative is a legislative entity that discusses the policies of United States of America alongside with executives entity in the USA while the Senate is a legislative entity that controls the Checks and Balances of executives in the USA.

As the election had already done, ironically, the Republicans won the senates while the Democrats won the house of representatives. This means that the current president, Donald Trump, which comes from the Republican party, must discuss the federal policies with the house of representative which majorly are from the Democratic party. This creates a different intention and conflict of interest which affects various aspects, including stock market globally.

Seeing the current condition, Donald Trump is being more cautious in determining policies as his policies could easily be rejected by the house of representative. Hence, there is a positive sentiment in the global market, causing the price of USD depreciated against most of the global currencies, including Indonesian Rupiah. As per November 8th, 2018 or during the election day, the price of Rupiah per 1 USD hits the lowest since September 2018 which is Rp 14.490 per USD. The stock index price in Indonesia had also grown to 5990 points meaning that the election result causes a positive sentiment in Indonesia also.

Seeing from the condition above, Indonesian investors should not worry that much, but still, they have to be cautious in making investing decision. The election result which causes a conflict of interest between the house of representative and Donald Trump causing that Donald Trump would be more cautious in making economic policies. Hence, the global sentiment would be positive and causing that investors would consider investing in any other form of currencies, including Rupiah. But, as an investor, we do still have to be wise in investing, considering the factors affecting the stock market in Indonesia are inflation rate, foreign inflow, CAD, and currency of Rupiah.

 

Opportunity on Initial Public Offering

by Ichlas Zul Azmi – Team P-All Right Investment

Initial Public Offering (IPO) or also known as going public is a process where the unlisted company sells their stock for the first time or listed company that issues new shares to the public. The purpose of a company conduct IPO is to get funds from the public for a certain reason, like expand the business or to pay the due debt. Then there is a lot of people that believe this kind of stock can generate instant profit overnight.

Well, historically many stocks that risen fantastically, for example, Shield On Service Tbk. (SOSS), the current price is Rp1,275 while the IPO price was Rp275 on November 6, 2018. On the first day, SOSS generate 50% and then continue a 463% increase in the next seven days, it’s a crazy number. Another example is Kota Satu Property Tbk. (SATU) that go public on November 5, 2018, with the price of Rp177. Then on two days, the price increasing into Rp266 or 103.57% in percentage.

In another side, there is also a stock that gets fantastic decline on their first day on the exchange. The example is Medialoka Hermina Tbk. (HEAL) that decrease 14.32% from Rp3,700 into Rp3,170 on their first day on the exchange. Another example is Asuransi Tugu Pratama Tbk. (TUGU), the price decrease from Rp3,850 into Rp3,640 or 5.46% in percentage.

This condition can be seen as an opportunity. As always, the opportunity exists with risk on the other side. We can see on SATU; the current price was only Rp125. After two days of fantastic profit, now the price going down to 46.99%. Until now, the Indonesian Stock Exchange has recorded 50 company that already go public in 2018. This number was the largest in Asian, for example, Singapore recorded 14, Vietnam 8, Malaysia 16, Thailand 7, and Filipina only one.

So, the question is how to pick IPO stock that will generate income to us. And here several tips if you want to pick IPO stock:

  • Track record of the underwriter

Investors need to find out the historical performance records of the underwriters when offering shares. If the stock has a lot of requests, it means good. In addition, note also the post-listing underwriter track record. If the share price of the issuer continues to rise, it can be interpreted that the underwriter has a fairly good strategy in handling the IPO.

  • The business of the company

Investors have to look at the capability of the company. Whether the company well known or not, and how the business prospect on the future. And if the company are part of a big company that already listed, that it can be a good sentiment for the market.

  • Market condition

Company with good fundamental even can’t the success when the timing is bad. The rise or fall of IPO shares is strongly influenced by the purchasing power of traders and investors at that time. Therefore, keep paying attention to market trends!

There are the lists of the company that will go public soon:

  1. Urban Jakarta Propertindo with price Rp1,000-Rp1,250 around 4-6 December 2018.
  2. Pool Advista Finance will be listed on the exchange on November 16, 2018.
  3. Estika Tata Kiara with price Rp135 will conduct public offering around December 4, 2018.
Current Account Deficit Gets Widen, Should Indonesia’s Stock Market Worry?

by Haikal Hafis – Saratoge Investama

On the November 9th 2018. The Central Bank of Indonesia announced that Current Account Deficit (CAD) widen from US$ 8,8 Billion or about 3% from the Gross Domestic Product (GDP) to US$ 8,8 Billion or 3.37% from GDP. Automatically makes the indonesia’s Balance of Payment (BOP) deficit raised into US$ 4.3 Billions from US$ 4 Billions on the previous quarters.

The main factors that caused widen CAD are the increase of oil imports when the oil prices sharply increased, and also the increase of pilgrimage (Hajj) related goods import on the last September.

Reflecting from the news above, capital market investors in Indonesia indeed consider this to be a negative sentiment for investments. This negative sentiment could cause panic for capital market investors in Indonesia, especially foreign investors. But there are several things we must also know about Indonesia’s macroeconomic conditions which are other indicators in the growth of the capital market in Indonesia, such as the inflation rate, foreign inflow, foreign exchange reserves, and the exchange rate of the Rupiah.

Seeing from the inflation rate perspective, inflation in Indonesia is still at 2.39% for year-to-date (YTD) and 3.12% for Year-on-Year (YoY) it shows that the inflation rate in Indonesia has been well maintained. The next indicator is foreign exchange reserves, in October 2018 there was an increase in Foreign Exchange Reserves of US $ 400 Million after falling in the previous month. The increase in foreign exchange reserves was caused by the withdrawal of foreign debt and income from foreign exchange oil and gas. Furthermore, there are indicators in the form of the Rupiah exchange rate, after falls into IDR 15,203 per US Dollar at the end of last October, slowly but surely Rupiah appreciated again to the level of IDR 14,678 per US Dollar at the Friday (11/09/2018) trading closing. This is a positive sentiment that indicates the economy is gradually recovering after being hit by an uncontrollable storm of rupiah depreciation in September – October. The last is the foreign flow indicator, it recorded fromt9 October – 9 November 2018 trading session foreign investors recorded Foreign Net Buy of Rp9.26 Trillion which indicates fresh air for the Jakarta Composite Index (JCI). Those positive indicators is a sign that sooner or later the JCI will re-enter the bullish trend.

So actually referring to the summary above there is nothing to worry about and panic at this time with the increasing CAD deficit, because other indicators in the macroeconomic growth of the capital market in Indonesia have provided positive signals for its increase. But apart from that as an investor, we must still be wise in managing our capital, do not be complacent about something that is uncertain, and remains disciplined in the investment plan that we have made.

Agriculture Sector Index Fall Off

by Priyanka Zahra Diandra – GoSip Cuan Capital

Agriculture sector index is opened in the red zone. Opening the trade, Tuesday (11/13/2018), the agriculture sector index continues to weaken. The Agriculture sector index fell 27.4030 points to 1,443.7900 when closing on Tuesday.

Since the beginning of November, the agriculture sector index has continued to fall off until today. There was an increase on Wednesday (11/2/2018) as many as 3.0130 points to 1,535.5260 but on the following day, it continues to fall off again.

However, not all of the stock in the Agricultural sector is bad. Some weakening sectors still have the potential to rebound soon, but we also have to consider the fundamental of the stock and the technical analysis to consider buying a stock.

Revolution Industry 4.0 Effect on Telecommunication Sector

by Raissa Pramudi  – Intelligent Bull Capital

Revolution industry is recognized by improvements in technology. Technology in industry 4.0 is the enhancement of computer with smart and autonomous system fueled by data and machine learning. Companies in Indonesia starts to change the way of production and adapt to the newest revolution. Telecommunication sector is highly related to the revolution. Automation, that becomes the characteristic of Industry 4.0, use network for the exchange of data. The network is provided by companies in the telecommunication sector.

I asses that the telecommunication sector will develop. It is an instrument for a company to digitalize their system and follow revolution industry. Companies included in Indonesia telecommunication sector are Telkom, Indosat, XL Axiata, etc. Companies outside Indonesia are Singtel, Axiata, PLDT, True, etc.  I think we will gain some profits if we buy stocks in the telecommunication sector. It is the right time for the investor to put money in the telecommunication sector! Decide or regret.

 

Palm Oil Issues Emerged: The Down Trend of Agriculture Sector

by Samuel – BerCuanda Aja  Investment

Palm oil has become one of the most important crops for food, energy, and international trade in Indonesia. With major efforts to reduce fossil fuel dependency and new targets for the introduction of biodiesel blends, the domestic demand for palm oil is bound to increase rapidly in the coming decade. Likewise, the demand for vegetable oils continues to increase globally. Palm oil is an important commodity for Indonesia both domestically and internationally. The national CPO production has grown by 8% annually in the last years, increasing from 22 million tonnes in 2009 to 33 million tonnes in 2014. In 2014, the domestic market absorbed 30% of the CPO production within three main categories of use: food, biodiesel production, and other industrial non-food uses.

Palm oil has been more than just a product to the producing countries. The palm oil sector provides a livelihood for 16 million Indonesians through direct and indirect employment. Palm plantations involve small farmers living in rural and remote areas: 42% in Indonesia, 40% in Malaysia and 80% in Nigeria. In Indonesia alone, around 61 cities and small towns develop and live thanks to this sector. Palm oil is also one of the most important sources of export revenue for Indonesia, worth US$19 billion annually, with the EU, China and India being Indonesia’s main export destinations.

However, while this offers the opportunity for continued development of the palm oil industry, it requires a significant expansion of palm oil production which may lead to negative impacts such as land pressure and the increase of greenhouse gas (GHG) emissions, among others. In fact, previous expansion of palm oil production in Indonesia has been pointed out as a major cause of deforestation and GHG emissions.

Negative campaigns against palm oil enter a new stage: not only are NGOs and industries of other vegetable oils campaigning harder but parliaments, as well as central and regional governments in some countries, are now taking the issue to the official level. The Norwegian Parliament for example, which has proposed to exclude palm-oil biofuel from government procurements. Another example is The European Parliament which adopted a resolution recommending that the European Union Commission phase out palm-oil biofuel from the European market beginning in 2021.

These issues may progressively cause the industry to weakened its productivity. The agriculture sector has been staying in the red zone for two months now and would keep going on the downtrend up to 5%. In the recent weeks, the price of agriculture sector companies has been relatively cheap so investors can take advantage of this moment to do transactions in the sector.

What Sector I Have to Invest in 2019?

by Vania Adinda – GoSip  Cuan Capital

IDX Composite have the opportunity to grow up in 2019. This expected to be helped by window dressing factor carried out by find management investor from non-bank industry or investment manager and also in 2019 there’s an election of a new president in Indonesia and will be held in April. Even though that in November along with the sentiment of increase of interest rate in the USA this will affect to the IDX Composite.

Cause factor of window dressing there are listed companies stock sectors that are considered prospective such as, consumer, telecommunication and Construction.

Consumer sector in 2019 has potential prospective if Gross Domestic Product (GDP) per capita in a good way with increase more. Right now, GDP per capita of Indonesia is 5.2% ( Source: Indonesia Investment ) and will estimate in 2019 range 5.3% until 5.4% ( Source: Indonesia Investment ).

In 2019 Telecommunication sector one of prospective sector too. Powered by industry 4.0 telecommunication sector will increase their graph and election of legislative and executive will increase cause promotion in social media.

Construction sector such as Wika, WSKT, WTON and etc, can be a good prospective cause in 2019 will become politics year. The presidential candidate usually will make a deal to make Indonesia flourish and after their win will do/realization their promise.

Welcome to The Period of Roller Coaster in Market

by Kristian Linardi – Bercuanda Aja Investment 

It has been a wild ride for Indonesia Stock Market for the past 11 months and probably for the rest of the year. The market index increased 19.9% to close 2017 at 6,355.65, setting a record on all-time high. It was followed with another great month as the market reach 6,689,29 in February and March, to break its previous record on all-time high. It turned downhill as the market fall to below 5800 in May. Since then, it’s been an up and down for the market since then. The big question becomes how an investor should react with this situation.

Hold some huge amount of cash. While volatility is good for traders, it can be bad for long-run investors. According to investors.com, Berkshire Hathaway has a plenty of cash in its account. It can be a signal that the market is too expensive right now and Chairman Warren Buffett is waiting for some distress or even worse a crisis. Seeing on how Indonesia financial assets reflect on its American counterpart, it is safe to do what Warren the Oracle of Omaha Buffett is doing. If the investors still want to get some income, they can buy short-term obligation since as of right now, it offers a great yield.

The other option is to buy in the dip. Volatility opens the opportunity for investors to buy at the lowest point or in this case at a more rational price. The important note for this strategy is to buy selectively and slowly. Investors need to make sure the stocks they pick have a low debt to equity ratio (DER) and high quick ratio (QR) to make sure when there is a crisis in the market, the company could be able to pay its obligation and survive. Such stocks can be found in KLBF (DER 49.02%, QR 282.25%), ICBP (DER 40.7%, QR 157.07%), and ADRO (DER 66.12%, QR 168.25%).

 

Indonesia Property Sector

by Eric Cahyadi Widjaya –

Our property industry has been declined since 2013 until now and hasn’t shown any changing trend in recent years. Even though the outlook of this sector is still bad, the valuation of the property company shows pessimism in the market. Most company PBV ratio is bellowed 1 , although the company still generate positive earning. Seeing the valuation right now, I think that this is the time to collect some cheap property stock.

There is a bubble property price assumption in the property sector that forms bad expectation in the market and drags the stock price down.  I agree with the market outlook that judges the property business is in the decline cycle, but I don’t agree with the market where they see in the following years, the property industry will keep declining. In my view, the property sector will start to change their trend in 2019 or 2020.

The bad sentiment has come from BI rate tighter policy. The interest rate increases and directly affect the loan interest in retail level including KPR. The higher cost of financing in housing debt, the lower public interest in spending that potentially drag down property industry sector especially for the customers who buy for investing.

However, in 2020 Indonesia will experience middle age boom which is indicating the rises of the millennials generation. As we know, one of the middle age prime needs is a house. I argue, even though the cost of financing is higher than before, the customer who is young and buying it for the living tend to ignore the cost due to their high income and their productive age. Moreover, Indonesia LTV policy right now is around 90-100% which mean give good climate for the first home buyers. The second catalyst that indicating the property industry has enough space to grow is the backlog data. in this year Indonesia is in the position lack of house with a backlog estimated 10 million houses. I think with those data, real estate outlook in Indonesia could maintain their price level.

The third catalyst is the commodity industry recovery. I argue that Indonesia property sector is boosted by other industry growth. And if the commodity is good, I think Indonesia property industry will also grow due to higher confidence spending. The mining industry is one of the key drivers of Indonesia economic growth. And seeing the index, there is a correlation between mining and property.