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Investors bullish on coal stocks despite harsh market
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Coal barges are lined up to be pulled along the Mahakam River in Samarinda, East Kalimantan, on Aug. 31, 2019. (Reuters/Willy Kurniawan)
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ndonesian coal stocks are expected to enjoy an uptick despite a forecast of further declines in coal prices in the face of a subdued economic recovery in China and muted industrial activity in manufacturing and construction, analysts say.
Felix Darmawan, an equity research analyst at Panin Sekuritas, said the outlook for Indonesia’s coal industry would depend on global coal prices.
“Prospects for Indonesian coal shares will be more bullish in the short to medium term, as an expected increase in demand for coal serves as an opportunity for larger export volumes,” he told The Jakarta Post on Wednesday, adding, however, that the bullish mood was “seasonal”.
High interest rates resulting in a global economic slowdown were one of the factors weakening the IDX Composite index over the first half of this year.
Indonesia’s energy sector, mostly supported by the subsectors of coal, oil and gas, was badly impacted by the economic downturn. The sector booked the worst performance and was down almost 20 percent year-to-date (ytd) on Thursday, Indonesia Stock Exchange (IDX) data show.
Publicly listed coalmining firms Adaro Minerals, Indo Tambangraya Megah, Indika Energy and Bumi Resources have seen their respective share prices drop 38.7 percent, 34.4 percent, 22.5 percent and 22.6 percent ytd.
“The end of the La Nina [weather] cycle should allow an increase in electricity production in countries that are still dependent on coal, setting a positive sentiment for global coal prices,” Felix said. But prices would also be subject to sudden shifts on the demand side, he added, caused by several factors, including a slowdown in Europe’s coal consumption due to recovering gas trading volumes.
