TheJakartaPost
Please Update your browser
Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.
IDX to offer two new indices to gauge share prices
Stock market players will soon have new benchmarks to monitor developments in local stock prices, as the Indonesia Stock Exchange (IDX) plans to launch two new indices in August
Change Size
S
span>Stock market players will soon have new benchmarks to monitor developments in local stock prices, as the Indonesia Stock Exchange (IDX) plans to launch two new indices in August.
IDX development director Hasan Fawzi said Thursday that the bourse had readied two new indices, IDX Value30 and IDX Growth 30. Each index, he said, would track the prices of 30 selected stocks.
He said the IDX Value30 would track 30 stocks with low valuations based their price-to-earnings ratio (PER) and price-to-book value (PBV). The bourse also looked into each stock’s fundamentals, such as financial performance, business sustainability and prospects.
“We’ve been running a five-year test for the IDX Value30 stocks, and its shows that they have consistently outperformed the market,” Hasan said after a gathering in Jakarta.
He said the IDX Growth30 was the opposite of the IDX Value30, and consisted of high valuation stocks with sound business performance. The stocks in the two new indices would be selected form the existing IDX80, launched earlier this year, which consisted of 80 of the most liquid stocks with big market capitalization.
Hasan said the two new indices were in line with the bourse’s plan to launch two to five new indices a year to create new price benchmarks for market players.
Investment research head Wawan Hendrayana of mutual funds data research firm Infovesta Utama told The Jakarta Post on Wednesday that the new indices would be helpful for fund managers, who could use them as alternative underlying assets for products like mutual funds, exchange traded funds (ETFs) and derivatives.
“They [the new indices] could help pick the right stocks to develop products that would suit investors’ needs and investment strategies,” said Wawan. The fund managers could also develop products that would offer higher returns than the Jakarta Composite Index (JCI), which had increased 39.52 percent in the last five years.
He added that the new indices could also offer investors new benchmarking options based on criteria other than liquidity.
The Post observed that nine out of the 22 current IDX indices included liquidity among their criteria, with the LQ45, IDX30, IDX80 and Kompas100 the most prominent indices. However, the bourse had launched several indices with other criteria in the past few years, such as the IDX High Dividend 20 based on dividend yield and the PEFINDO i-Grade based on investment grade.
Wawan said that indices with new criteria could also develop more mutual funds, ETFs and derivatives that would deepen the country’s financial market.
Other than benefiting fund managers and the financial market, securities firm Koneksi Kapital research head Alfred Nainggolan said that the new indices could also benefit retail investors as well.
“Investors will save a lot of time because they don’t need to analyze hundreds of stocks themselves to know which ones have the lowest values or offer the biggest returns,” Alfred told the Post by phone on Thursday.
The IDX listing currently comprises 631 companies. On Tuesday, Travel firm PT Hotel Fitra International became the latest company to list its shares.
Given the large number of listed companies, Alfred said, issuing the new indices was necessary to create stock groups that matched certain investment strategies, as well as to help retail investors and fund managers manage their portfolios passively by adjusting them to the available indices.
He stressed, however, that the bourse must maintain transparency on why a particular stock was added to or removed from an index.
