Thursday May 8, 2:20 PM
INDONESIAN STOCK MARKET IS DOING EXCEPTIONALLY WELL
By Vasu Menon, Chief Editorial finatiQ
The Jakarta Composite Index has rebounded by 22% from its recent low, making it the best performing Asian bourse over the last two months.
| Indonesia |
March 11 |
22.2% |
| Nasdaq |
March 11 |
19.8% |
| South Korea |
March 17 |
17.3% |
| Dow |
March 11 |
14.1% |
| Philippines |
March 17 |
8.5% |
| Singapore |
March 10 |
8.4% |
| Thailand |
March 11 |
8.3% |
| Japan |
April 28 |
6.3% |
| India |
April 25 |
2.4% |
| Malaysia |
March 11 |
2.0% |
| Taiwan |
April 28 |
2.0% |
Even a bomb blasts that ripped through Jakarta's Sukarno Hatta Airport in late April failed to derail the Indonesian bourse, giving credence to views that stocks may have turned the corner and are now more resilient to domestic security setbacks than a year ago.
Analysts say that the recent improvement in economic indicators, such as lower inflation and interest rates, as well as a stronger rupiah have helped the stock market. The rupiah has been incredibly stable in the past months and this has allowed the central bank to lower interest rates.
Mr Peter Hames, Director for Asian Equities at Aberdeen Asset Management, said that the Indonesian market is benefitting from the relative calm on the domestic political and economic front as evidenced by the strength of the rupiah which is at a 11-month high against the US dollar.
He said that the troubles that some other Asian countries and stock markets are having because of issues like SARS and reliance on the US economy is also benefitting Indonesia.
"I suspect not many international investors have focused on the Jakarta Stock Exchange for some time as a result of all the troubles over the past few years. Maybe now, they are taking a second look," said Mr Hames.
Ironically, foreign investors who were hesitant to invest in Indonesia because of its turbulent history may now be seeing the country as a safe haven. SARS has cast a pall over several Asian markets but Indonesia has been fairly unscathed with only one case so far and no deaths.
Indonesia's large domestic economy also makes it more insulated to global shocks and the slowdown in the US economy. Not surprising therefore that the World Bank decided recently to maintain its economic growth forecast for Indonesia this year at 3.3 per cent even though it downgraded forecasts for the rest of Asia due to SARS and the war in Iraq.
Looking to invest in the Indonesian stock market?
Investors here can buy directly into companies listed on the Indonesian bourse, but this could be a risky strategy unless they know the stock market well and understand its pecularities.
A safer route could be to invest into an Indonesian fund that's managed by a conservative fund manager. Aberdeen Asset Management is one such fund managers and it runs the only Indonesian fund available here. According to data from Lipper, the Aberdeen Indonesia Equity Fund is the best performing unit trust this year, returning nearly 20 per cent for the period up to May 5.
According to Mr Hames, the fund's focus has tended to be on consumer companies, mid caps and some of the local offshoots of MNCs. This is where Aberdeen has managed to find some of the best and most profiatble in Indonesia. Some of its biggest holdings include Unilever Indonesia, Sepau Bata,
Bank NISP and Dynaplast.
"Despite the recent run we still feel valuations are attractive," said Mr Hames.
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