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Stock market growth 'only momentary'
Charging ahead: A man watches stock price movements at the Mandiri Sekuritas office in Jakarta on Thursday
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Charging ahead: A man watches stock price movements at the Mandiri Sekuritas office in Jakarta on Thursday. The Jakarta Composite Index (JCI) increased 1.46 percent to close at 5,098.1, gaining 73.30 points as it continued an upward trend starting July 4, recording the yearâs highest level on Thursday following the countryâs presidential election on Wednesday. (JP/AWO) (JCI) increased 1.46 percent to close at 5,098.1, gaining 73.30 points as it continued an upward trend starting July 4, recording the yearâs highest level on Thursday following the countryâs presidential election on Wednesday. (JP/AWO)
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span class="inline inline-none">Charging ahead: A man watches stock price movements at the Mandiri Sekuritas office in Jakarta on Thursday. The Jakarta Composite Index (JCI) increased 1.46 percent to close at 5,098.1, gaining 73.30 points as it continued an upward trend starting July 4, recording the year's highest level on Thursday following the country's presidential election on Wednesday. (JP/AWO)
The Jakarta Composite Index (JCI) might suffer a drastic drop after the stock market reactively grew on the back of the presumptive win of presidential hopeful Joko 'Jokowi' Widodo once political euphoria dies off, an association says.
The JCI ' the main barometer at the Indonesia Stock Exchange (IDX) ' appreciated by nearly 3 percent to peak at 5,165.4 on Thursday, surpassing the 'normal' level of 4,800, according to securities analysts.
They emphasized that the stock market euphoria would not last long because it was not supported by macroeconomic conditions and listed companies' performance.
The index quickly soared to 5,133.4 right after trade opened on Thursday, jumping by 2.15 percent from 5,024.7 on the previous day's closing.
The JCI ' which has surpassed the psychological benchmark of 5,000 since Tuesday ' ended trading at 5,098.01 on Thursday, or up by 1.46 percent from the day before.
Indonesian Association of Securities Analysts (AAEI) member Budi Frensidy said that the soaring index was purely driven by the possible victory of market darling Jokowi, whom most pollsters indicated to have defeated dismissed military general Prabowo Subianto in the July 9 presidential race.
Budi said that the JCI had moved 'too fast' ' because of political sentiment, rather than actual macroeconomic conditions and the financial performance of listed companies ' that it might not leave room for more growth.
'We have estimated that the index will conclude between 4,800 to 5,100 this year,' he said.
'The 5,100 level should only be reached by year-end, not now, and the figure should only be reached if the country's economic growth target is achieved and the rupiah remains stable against the US dollar throughout the year that it does not erode companies' profits.'
AAEI member David Nathanael Sutyanto, an analyst with First Asia Capital, said it was possible that the JCI might slump significantly after the 'Jokowi effect' died off, given that the growth was in contrast to the country's economic slowdown.
'We have to be extra cautious that once the political euphoria is gone and the sentiment does not benefit investors anymore, the JCI will sink. Only by then will investors return to reality and start to scrutinize the financial performance of listed companies,' he said.
'It means that there will be profit-taking and the JCI might drastically slump.'
Tuesday was the second time the JCI hit the psychological benchmark this year, after earlier surpassing 5,000 in May.
David said that the main driver of the JCI's strong growth this year was foreign investors' enthusiasm over Indonesia's promising growth as an emerging market and its future political succession with a new face like the inactive Jakarta governor.
IDX data showed that foreign investors purchased a total of around Rp 9.8 trillion worth of shares on Thursday's trading, nearly twice the purchase value of Rp 5.85 trillion carried out by domestic investors.
The data also shows that foreign investors contributed 51 percent to Thursday's total net trading value of Rp 15.8 trillion.
The JCI lead the regional index on Thursday, being the only index to post above one percent growth on the day of trading.
All indexes ended in the green during Thursday's trading, with property index booking the highest growth at 3.39 percent.
Shares of state-owned lenders Bank Rakyat Indonesia and Bank Mandiri, as well as diversified conglomerate Astra Internasional Indonesia, were the top movers during the day, while state-run telecommunication company Telkom, private lender Bank Tabungan Pensiunan Nasional (BTPN) and media holding firm Media Nusantara Citra (MNCN) were among the top laggards.
