Consumer-based stocks expected to buoy market

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Shares in Indonesia’s consumer based companies are expected to continue rising for the next few weeks on the back of buying mood as Muslims will spend more during the fasting month, which will start on July 21.

“Investors have anticipated growth of business of consumer-based companies ahead of Ramadhan. We have seen stocks such as MAPI [Mitra Adi Perkasa] and Indofood rising,” eTrading Securities research analyst Andrew Argado said.

Shares of fashion retailer MAPI was rallying last week, closed at Rp 7,750 apiece on the last day of the market or Friday, an increase of more than 10 percent from Rp 7,000 (74 US cents) at the closing of the beginning of the week.

Shares in the food manufacturer PT Indofood Sukses Makmur (INDF) closed at Rp 5,550 apiece last Friday, increasing by 0.91 percent compared to a day earlier. INDF has risen 14 percent from early July.

Blue chip PT Unilever Indonesia, the third largest company on the local bourse in terms of market capitalization, saw its shares rise 3.91 percent to close at Rp 23,900 on Friday.

The Jakarta Composite Index (JCI), the main price indicator at the Indonesian Stock Exchange (IDX), which closed at 4,019.67 last week, down 0.88 percent from the start of the week. According to IDX weekly data, this was the first weekly drop since the second week of June.

The LQ45, which represents the bourse’s 45 most liquid stocks, closed at 687.18, increasing by 0.93 percent compared to the previous day. The LQ45 fell 1.06 percent on weekly basis.

On a year to date basis, the JCI has gained 5.17 percent while the LQ45 up 2.03 percent.

Foreign investors dumped Rp 492.3 billion last Friday, leading to a net sell of Rp 916.27 billion for the whole week. However, the year-to-date foreign trading value showed a net buy of Rp 2.56 trillion, an indication that foreign investors still find Indonesian market interesting.

Jansen Kustianto of Sinarmas Sekuritas said that the JCI would maintain its gain this week, however, it will remain affected by sentiments following the economic slowdown in China.

“Technically, the index is predicted to move in a strengthening trend. Speculation on whether the Chinese government will give a stimulus or ease its monetary policy following slowdown in the second quarter will influence the index,” Jansen said.

He said the JCI would move in a narrow range of 3,950 to 4,040 this Monday.

Indonesian companies are expected to grow 15 to 20 percent this year on the back of strong domestic demand amid concerns of the country’s economic growth during the ongoing European debt crisis and economic slowdown in the United States and China, Andrew says.

Indonesia may rely on its domestic consumption to maintain economic growth, Andrew said. Nonetheless, the implementation of export restrictions for some products and loan to value ratio regulation in which the central bank asked higher down payment for automotive and housing loans, would pose as challenges, Andrew said.

“The country automatically depends on domestic consumption following the regulations. Although it is difficult to book growth only from the domestic consumption, we still have to hold our hope,” he said.