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Jakarta Post

Local stocks enjoy foreign inflow seeking rare growth

The local stock index is among the world’s top performers so far this year, as funds seek scarce growth worldwide amid a global market rout

Prima Wirayani (The Jakarta Post)
Jakarta
Thu, February 11, 2016

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Local stocks enjoy foreign inflow seeking rare growth

The local stock index is among the world'€™s top performers so far this year, as funds seek scarce growth worldwide amid a global market rout.

The benchmark Jakarta Composite Index (JCI) has grown 3.04 percent year-to-date (ytd), one of the few among major global markets to record positive growth.

Foreign investors have pumped in a net Rp 614.1 billion (US$45.66 million) ytd '€” including Rp 4.3 trillion in net purchases recorded in two weeks ending Feb. 5 '€” banking on growth in Southeast Asia'€™s largest economy against the backdrop of economic uncertainty in developed countries.

Indonesia'€™s gross domestic product (GDP) grew beyond expectations in the fourth quarter at 5.04 percent, rounding up full-year growth at 4.79 percent. That, and stable political conditions, built up local stocks'€™ resilience, said Lautandhana Securindo president director Wientoro Prasetyo.

'€œGlobal funds need new homes as China and Japan'€™s markets are currently not preferred,'€ he said, adding that investors had no other choice other than to place their money in emerging markets such as Indonesia.

Major market indexes worldwide have seen contractions so far this year as fears emerged over the global economic slowdown, collapsing oil prices and central banks'€™ ability to reflate asset values.

The Bank of Japan surprised the market recently by cutting some rates to below zero, following the lead of its European Central Bank counterpart that has previously applied negative interest rates, suggesting shaky ground for economic recovery in the developed world. Meanwhile, China is still adjusting with its economic growth now below 7 percent. Bahana Securities head of research Harry Su expressed optimism that the local stock market would weather the gloomy global situation.

'€œOur fundamentals are good enough given our economic growth that'€™s among the highest worldwide,'€ he said on Wednesday.

Bahana Securities projected that the JCI could reach 5,100 by year-end, up around 11 percent for the year.

The stock index is now at 4,732.48, compared with 4,508.45 at the end of last year, with consumer goods, manufacturing, and miscellaneous industries sub-indexes fueling growth so far this year.

However, local market players remain vigilant, with First Asia Capital analyst David Sutyanto saying that despite the strong performance, the index will remain vulnerable to external sentiments.

'€œStock markets everywhere are fragile, depending on the sources of volatility,'€ he said.

The Indonesian stock market is more vulnerable to China and Japan'€™s economic conditions than those of European countries as Indonesia has close business relationships with the East Asian countries.

David said that in spite of the global volatility, the Indonesian market was now more ready to weather market turbulence after having sailed through the 1998 and 2008 crises with resilience.

IDX president director Tito Sulistio voiced a similar view, saying that the capital market was now resilient, as evidenced by the rise in the share of local market participants that likely based investment decisions more on domestic catalysts than global sentiments.

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