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Stock-picking 'method can weather gloomy market'
Investors should shift their trading behavior from traditional sector-based investments to an individual stock-picking method in order to weather a gloomy market that will persist throughout the year, analysts have said
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Investors should shift their trading behavior from traditional sector-based investments to an individual stock-picking method in order to weather a gloomy market that will persist throughout the year, analysts have said.
KDB Daewoo research head Taye Shim said on Tuesday that investors should focus on the fundamentals of each stock rather than sectors in general because all sectors have been declining so far this year.
'You have to know the core of their strength,' he told a media briefing in South Jakarta, 'Even within a sector, there will be a lot of differentiation within its space.'
Shim added that amid a sluggish market, a top-down approach in investment would not work, noting the example of the recent Bank Indonesia (BI) rate cut that did not automatically generate an increase in banking stocks.
Data compiled by KDB Daewoo Securities Indonesia revealed that stock prices in almost all sectors listed on the Indonesia Stock Exchange (IDX) had gone south this year, except consumer stocks, which booked an increase of 1.2 percent.
Nonetheless, Shim said that several stocks, such as those of state lender Bank BTN, national flag carrier Garuda Indonesia and oil-and-gas tanker company Soechi Lines, would maintain growth despite a softening in their respective sectors.
Bank BTN would see visible top line growth from the central bank's monetary easing, Shim wrote in his research note, while Garuda had demonstrated solid earnings recovery up until September last year and would likely benefit from the falling price in crude oil.
Despite a plummeting oil price, Soechi Lines would maintain stable earnings from its connections to state-run oil-and-gas firm Pertamina and through its shipyard business.
Shim projected that the JCI would float between 4,120 and 5,498 this year with a deeper down side than up side.
Market liquidity and global market developments are expected to drive stock prices.
As of Friday, the overall performance of the Jakarta Composite Index (JCI) was relatively better than its peers in the Asia-Pacific region as well as in Europe and America despite still booking negative growth.
The JCI has lost 1.5 percent of its value so far this year, a better performance compared to the Thai and Malaysian stock markets, both of which have fallen by more than 3 percent this year. The Dow Jones industrial average has lost 8.3 percent of its value while Standard and Poor's 500 and Euro Stoxx have lost 8 percent and 9.6 percent, respectively.
China's Shanghai Composite Index is at the bottom of the list. The index has lost 18.03 percent of its value as of Friday.
'If investors individually pick stocks, they'll be very happy despite the market turmoil,' he said.
'They need to look at companies on an individual basis.'
Schroders director Michael Tjoajadi shared a similar view, arguing that although he saw consumer products and the construction industry as potentially strong sectors this year, the nation's largest private fund manager would be looking at each company individually instead of at general sectors.
'We are generally looking at companies, not sectors, that will be able to benefit all of us,' he said in November.
Unending public demand has raised the prospect for a strong performance in consumer products while the construction industry's strength comes from relying on the government's infrastructure projects that have always benefitted the industry.
