Analysts: Indonesia Fundamentals Good But Beware World Market Volatility

Investors should refrain from making big bets on Indonesia’s stock market anytime soon because of recent volatility and concerns that the United States and Europe will force a global economic slowdown, analysts and fund managers say.

“My advice is not to enter the market in the next one or two days. It is still very volatile. It could go up tomorrow but fall the next day,” said Adrian Rusmana, research director at Sucorinvest Central Gani.

Concerns that the financial crisis may have spread to Spain and Italy combined with news of the US credit rating downgrade continued to shake the Indonesia Stock Exchange on Monday, following Friday’s big decline.

On Monday the Jakarta Composite Index fell as much as 5.3 percent, before paring its loss to 1.8 percent. Just a week ago, the benchmark had closed at a record high.

Ruben Sukatendel, a fund manager at BNI Asset Management, is confident that there was still upside potential in Indonesia’s market, but he would not recommend entering the market immediately.

“We keep monitoring the market, but we are still in ‘wait-and-see’ mode,” he said. Fund managers are likely to keep their assets in cash before entering the market when the time is right, he said.

“Bond prices are still relatively expensive in Indonesia, and the market is not liquid. We don’t want our money to be bound up in the bond market and miss any momentum in the equity market,” said Ruben, who helps manage Rp 5 trillion in assets.

Ruben said BNI Asset Management is planning to buy into the equity market by the end of the week as prices look cheap. It could use 20 percent to 30 percent of its idle cash to buy stocks, he said.

Investors may get some guidance today, when Bank Indonesia meets for its monthly policy meeting.

Strong corporate profit, economic growth and stable interest rates are fundamental factors that may help to keep share prices from declining further.

The central bank is likely to keep its key interest rate unchanged, according to seven economists polled by the Jakarta Globe. It last tightened monetary policy back in February.

Bagus Hananto, head researcher at Onix Capital, said there are still opportunities to gain in Indonesia, especially with its stable economy as a support.

Kim Eng Securities Indonesia shared a similar view in its note to its clients on Monday, saying that despite “temporary turbulence”, the index is likely to rebound.

“For those with an investment horizon of over six months, we think there is opportunity for bottom fishing in the Indonesian market,” it said. “The country continues to show strong fundamentals and it is not too dependent on exports, making it relatively shielded from any global economy slowdown.”

The broker said that consumer goods, banking and the property sector remain attractive and warned against commodity and export-oriented stocks.

Source :
Jakarta Globe, 08 Agustus 2011 
http://www.thejakartaglobe.com/business/analysts-indonesia-fundamentals-good-but-beware-world-market-volatility/458033