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Jakarta index sees steepest decline in 20 months
Indonesian share prices mostly dropped on Thursday, with the main price index posting the steepest fall in nearly two years amid fears over unsatisfying first quarter corporate earnings and the countryâs economic slowdown
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Indonesian share prices mostly dropped on Thursday, with the main price index posting the steepest fall in nearly two years amid fears over unsatisfying first quarter corporate earnings and the country's economic slowdown.
The Jakarta Composite Index (JCI), the main price barometer at the Indonesia Stock Exchange, retreated 3.49 percent ' a level that had not been witnessed since August 2013 ' to close at 5,245.45 on Monday. The sharp drop in the index was triggered by a fall in blue chip shares, including Indonesia's major banks, Bank Mandiri and Bank Central Asia (BCA).
The JCI was the worst performer among its Southeast Asian peers, which mostly recorded increases. Monday's decline also resulted in the country's index to book the lowest year-to-date growth among growing Asia-Pacific indexes, up by only 0.35 percent since January, only above India, which saw its index slip 1.2 percent in the last four months.
'I am surprised by the steep slump. We had estimated that publicly listed companies would book lower-than-expected financial results in the first quarter and the country's economic slowdown is no longer news, having already been predicted. The fall seems so abrupt,' University of Indonesia and Samuel Sekuritas economist Lana Soelistianingsih said.
'The only possible explanation is that all of these factors, combined with a weak currency, worked together to drag the market as investors thought, 'that's it, we have to pull out from the market',' she went on.
A number of economists have predicted that the country's economy might not be able to touch 5 percent this year, as the nation still has to struggle with its current-account deficit amid rupiah depreciation against the US dollar and plunging commodity prices, as Indonesia still relies heavily on commodity exports. The lower-than-estimated earnings recorded by big capitalized stocks such as Bank Mandiri confirmed the slowdown in the country's economy. Like most Indonesian stocks, the local currency also weakened against the dollar on Monday. The rupiah declined 0.5 percent to Rp 12,982.5 versus the greenback.
Universal Broker research head Satrio Utomo said that the poor earnings performances in the first quarter confirmed further economic slowdown. 'Out of 10 published results, eight were below expectations. We expected to see corporate earnings grow by around 15 percent on average, but the published earnings showed that they did not even reach 10 percent,' Satrio said.
'This is a sign that the central bank has been keeping the interest rate too high for months, contributing to slowing the economy and company growth.'
Among reports investors have been keeping their eyes on is that of the country's biggest state-run lender, Bank Mandiri, which posted a 4 percent rise in net profit to Rp 5.1 trillion rupiah for the first quarter from a year earlier.
Diversified conglomerate Astra International Indonesia, which published its first quarter financial result on Monday, saw its bottom line plunge 15.6 percent year-on-year (yoy) to Rp 3.99 trillion.
Bank Mandiri and Astra were among the day's top laggards, seeing shares drop by more than 5 percent each. 'This should serve as a warning signal to the government that's there no use making a stabilization move without reform,' Bahana Securities' Budi Hikmat said. 'The government should lend a hand in easing pressures suffered by companies.'
Most Southeast Asian stock markets eked out gains on Monday as investors awaited major central bank meetings this week, Reuters reported.
Singapore's Straits Times Index was 0.12 percent higher. Broker NRA Capital said it expected the index to be range-bound in the near term, citing funds that had been diverted to Hong Kong and China.
Malaysia and the Philippines moderately extended gains from Friday, while Vietnam was nearly flat before the market closes for a long break. The Thai SET index was up 0.15 percent as gains in oil shares such as PTT Pcl outweighed losses in banks amid concerns about the impact of a weak economy on loan growth outlook. The room for upside remained limited for Thai stocks, said broker Phillip Securities.
