Retail investors have found themselves facing two difficult decisions amid a volatile Indonesian stock market that has wiped out trillions of rupiah in less than three months: to buy more shares or not.
Arief Hendarwan, a 28-year-old employee in Jakarta, admitted that he had been holding off from buying more stock for the past month as the Jakarta Composite Index (JCI) plummeted deep into the red.
“I’ve pulled out of buying more stocks to keep myself from losing more money because the share prices are tanking due to the fear of the coronavirus outbreak,” he told The Jakarta Post.
Arief did not stop there. He admitted that he was too affected by the panicked atmosphere spreading among market players, prompting him to sell stocks in his portfolio to seek cover from further losses.
However, the JCI rebounded after the US Federal Reserve delivered an emergency 50-basis-points rate cut on March 3, blowing a soothing wind for Arief to calm himself down.
“I’m still in a wait-and-see mode as I observe the latest virus developments and until the situation improves,” he said, adding that he believed the market rout would remain until the virus could eventually be contained.
The Indonesia Stock Exchange (IDX) data showed that its main gauge, the JCI, fell 17.12 percent so far this year with foreign investors dumping out Rp 7.12 trillion (US$497.37 million) worth of stocks more than they bought. The local bourse’ market capitalization has dropped to Rp 6 quadrillion from Rp 7.26 quadrillion at the end of last year.
The index rebounded 1.64 percent to 5,220.83 on Tuesday, after crashing 6.58 percent in the previous session. Stocks of private-owned Bank Central Asia (BCA) and state-owned Bank Rakyat Indonesia (BRI) and Bank Mandiri became the index movers.
The uncertainties stemmed from the COVID-19 spread around the globe that has hit stock markets worldwide from New York and London to Shanghai and Tokyo. The pneumonia-like illness infected more than 114,000 people globally, including 19 in Indonesia, and killed around 4,000, disrupting business activity in various countries, including economic giants China, Japan and Germany.
Fathia Haq, a 29-year-old expectant mother, stood on the opposite side of Arief as she planned to use the less-than-favorable market conditions to her advantage: accumulating cheaper stocks into her portfolio. She, however, did that with a careful and calculated strategy.
“I only buy stocks of companies that produce products that I know and have good fundamentals,” the Bali-based writer told the Post, referring to the companies’ financial state and profitability ratios.
Fathia, who planned to use the gains from her investment to pay for her unborn child’s school tuition fee, said the fundamental conditions had become the most important thing for her to pick which stocks are worth to be included into her portfolio.
Although she sometimes felt a pinch of worry from the stocks sharp decline, she tried to remind herself that buying stocks during a rout could help her gain big profits in the next five to seven years, enough to pay for the school tuition fee.
“I try not to panic and just think of the stock market is having a big sale right now,” she said.
The JCI gained almost two folds in its value in the last 10 years with the number of retail investors surging forward at 30 percent to 1.1 million people last year, the bourse data showed.
Domestic investors are the biggest traders at the local bourse so far this year with a 60 percent contribution versus foreign investors.
Sucor Sekuritas head of business development Bernadus Setya Ananda Wijaya was one of the market players that suggested investors to benefit from the weak market.
“Investors are slowly building up their portfolios while many stocks are at their cheapest price,” he said during a seminar in Jakarta on Feb. 29.
Mandiri Investasi deputy chief investment officer Aldo Perkasa explained on Thursday that such a strategy would be best fit for mid-to-long term investors as he expected the JCI would still move with high volatility in the short term.
“Investors should also be able to manage their fears [during the coronavirus outbreak] and watch out for other investment assets’ movement, like the government bond, that would influence the stock market’s movements and help them make a profit,” Bahana TCW chief economist and investment strategist Budi Hikmat said in a statement on last Tuesday.
He, however, reminded investors to stay prudent in investing during times of volatility like today, suggesting investors to closely watch other economic indicators, such as the rupiah value against the US dollar and global bourse indices. (ydp)