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Jakarta Post

It’s time to buy cheap bluechip shares, say securities analysts

  • News Desk

    The Jakarta Post

Jakarta   /   Mon, March 23, 2020   /   03:50 pm
It’s time to buy cheap bluechip shares, say securities analysts A woman walks past a large screen showing the trading numbers on the Indonesia Stock Exchange in Jakarta on March 9. (AFP/Adek Berry)

Bluechip stocks on the Indonesia Stock Exchange (IDX) have lost hundreds of trillions of rupiah of their value as the share prices fell to a historic low level as investors dumped their shares during a recent market rout, the exchange’s data indicates.

Between March 16 and 20, prices of most bluechip shares, also called big cap stocks, have fallen, such as Bank Central Asia Tbk (BCA) by13.99 percent, Telekomunikasi Indonesia Persero Tbk (Telkom) by 8.86 percent, Unilever Indonesia Tbk by 10.75 percent and PT Astra International Tbk by 17.65 percent.

Within the same period, the Jakarta Composite Index (JCI), the main gauge of the IDX, had declined by 10.57 percent. It saw its lowest point on Thursday at 4,105.42, the lowest seen since October 2015. This month alone, the JCI has lost 20 percent.

“The JCI has dropped significantly during the past several days as investors are worried that COVID-19 would significantly reduce business activities in the country,”  Mirae Asset Sekuritas Indonesia's head of research, Hariyanto Wijaya, wrote in his market commentary on Friday, explaining how the worry over the COVID-19 coronavirus pandemic was the main factor causing the market rout.

If based on their performances since the start of the year, the fall in prices of bluechip shares reached more than 45 percent. BCA’s share price has dropped by 29.22 percent year-to-date (YTD), Telkom by 26.24 percent, Unilever Indonesia by 27.19 percent and Astra International by 45 percent.

Read also: Indonesian stocks record first rally in week after series of suspensions

Anugerah Mega Investama director Hans Kwee wrote in a statement said that the price falls were more caused by negative sentiments resulting from noneconomic factors rather than by fundamental factors like their business performances.

“The decision to buy and sell is often not based on fundamental factors. Investors often sold their shares following other investors’ actions and the market trend,” Hans wrote in an article in a kontan.co.id column on Tuesday.

Bluechip shares have suffered a great loss in their value more because of herd behavior than their fundamental condition, he said.

According to the IDX 2019 annual statistics, BCA recorded a market capitalization of Rp 815.85 trillion at the end of 2019. As of Friday, its market capitalization stood at Rp 583.7 trillion, which means that its value went down by about Rp 232.15 trillion in the span of a few months.

The majority of BCA shares, 54.94 percent of them, are owned by its subsidiary company, PT Dwimuria Investama Andalan, which is owned by the Hartono brothers, Robert Budi Hartono and Michael Bambang Hartono.

Based on the Bloomberg Billionaires Index, the Hartono brothers, who are among the top 150 of the world’s richest people, have lost a total of US$14.73 billion year-to-date, with BCA’s loss of trillions of rupiah contributing to their decline in wealth.

Telkom’s market capitalization fell to Rp 285.30 trillion on Friday from Rp 393. 28 trillion at the end of 2019. As up to 52 percent of Telkom shares are owned by the government, it means the value of the government’s holdings in Telkomsel have dropped by Rp 111.98 trillion year to date.

Read also: Rupiah at weakest since 1998 crisis as foreign investors pull out amid virus fears

On the upside of the significant falls bluechip shares are experiencing, this provides investors with an opportunity to buy the stocks at low prices, as noted by Bank Negara Indonesia (BNI) Sekuritas head of research Kim Kwie Sjamsudin.

“I think this is the time to start buying bluechip stocks because I think the valuation is attractive,” Kim told The Jakarta Post on Friday.

Mandiri Investasi deputy chief information officer Aldo Perkasa also explained during his keynote speech in an event earlier this month that the current market condition was attractive for investors to start their “building position”.

“If we are talking about mid-to-long-term investment, it is an attractive level to start accumulating [stocks],” Aldo said, adding that today’s investors would have to “embrace that volatility has become part of investment these days”.

On Friday, Indonesian stocks rallied upward for the first time in the past week and several bluechip stocks had entered the green zone, while others stayed in the red.

Unilever Indonesia rose 10.18 percent from the previous trading day to Rp 6,225, while Astra International slid 2.07 percent to Rp 3,780 at the closing of Friday's trading. (ydp)