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Jakarta Post

Danareksa expects equity fundraising, opportunities for recovery next year

Danareksa expects equity fundraising, opportunities for recovery next year A woman walks past a large screen showing the trading numbers on the Indonesia Stock Exchange (IDX) in Jakarta on March 9. Equity markets collapsed on March 9 as the rapidly spreading coronavirus fanned fears over the global economy, while a crash in oil prices added to the panic with energy firms taking a hammering and wiping hundreds of billions off valuations. (AFP/Adek Berry)
Riska Rahman
Jakarta   ●   Tue, July 21, 2020 2020-07-21 07:43 298 6657ac82168da9fa101c8a40667f6260 1 Business Danareksa,equity-market,fundraising,JCI,pandemic Free

Brokerage firm PT Danareksa Sekuritas has suggested that there is a huge potential for equity fundraising next year as it projects the economy to start recovering from the pandemic.

Investment banking director Boumediene Sihombing said on July 16 that the firm expected the equity market to recover given that there were concerted efforts to battle the pandemic.

“There are opportunities for recovery in the development of vaccines and expedited health budget realization,” he said during a webinar.

Global and domestic pharmaceutical firms are currently working toward developing a vaccine for the coronavirus, which is expected to be ready for commercial use in 2021.

Due to slower-than-expected budget disbursement caused in part by red tape, the Indonesian government will accelerate healthcare spending, including disbursing incentives to medical workers, by allowing regions to verify and directly decide who will receive incentives.

The government has earmarked Rp 87.55 trillion (US$5.9 billion) from the state budget to strengthen the healthcare system, including Rp 65.8 trillion for COVID-19 management.

The Jakarta Composite Index (JCI), the Indonesia Stock Exchange's (IDX) main gauge, has lost 19.82 percent of its value so far this year following a global stock market crash in March caused by investors’ concerns over the pandemic’s impacts on the global economy. 

According to market player projections, the JCI will likely end the year at between 5,000 and 5,500, a wide range that shows how difficult it has been to predict market movements as pandemic-related risks will likely continue to create volatility.

The government expects the economy to shrink 0.4 percent this year under a worst-case scenario or grow 1 percent in a best-case scenario, with the economy tipped to contract 3.8 percent in the second quarter. It expects growth of between 4.5 percent and 5.5 percent next year.

Boumediene is also upbeat on the market’s prospects for initial public offerings (IPOs) in the second half of the year.

He said companies that were engaged in the poultry, media, consumer, telecommunications and tower provider sectors could potentially enter the equity market earlier than companies in other sectors.

“They could gain an advantage by entering the market earlier than companies from other sectors because they still have good prospects due to their minimal exposure to the pandemic’s impact,” he said. 

In regard to IPOs, the surge of new investors entering the bourse following the stock market crash in March is also expected to boost the market, according to Boumediene.

The number of single investor identification (SID) numbers rose to 1.2 million as of May 29 from 1.11 million at the end of 2019, according to IDX data.

“This proves that companies shouldn’t be worried about whether or not their IPOs will be absorbed by the market or not,” IDX assessment director I Gede Nyoman Yetna said during the webinar.

Given these conditions, he suggested that companies with their sights on an IPO start preparing themselves for the opportunity to seek funding in the country’s equity market.

The bourse saw 28 IPOs launch up until June, the most among exchanges in Southeast Asia, according to consulting firm McKinsey & Co.