JPMorgan: Indonesian Stock Market Still Promising, but Politics Overhang

A monitor showing the shares price at the Indonesia Stock Market (BEI), Jakarta. (JG Photo/Jurnasyanto Sukarno)

By : Vanesha Manuturi | on 9:58 PM October 09, 2014
Category : Business, Markets, Featured

Jakarta. Indonesia’s equity market is still promising, despite looming concerns from the country’s continuing political instability and foreign capital outflow, an executive at a local affiliate of JPMorgan Chase.

Aditya Srinath, executive director of equity research at J.P. Morgan Securities Indonesia, said that the country’s economic resilience so far and declining interest rates among Indonesian lenders can be taken as positive signs for the equity market.

“Interest rates are coming down. This means that liquidity is a bit better, which would give an overall lift. That’s what we think we should be focusing in the future,” said Srinath, during a media briefing on Thursday. He was referring to a trend that commercial lenders in Indonesia have been cutting their deposit rates to lower their cost of funds.

Maintaining a positive outlook, Srinath noted that any improvement in the market will still be haunted by macroeconomic issues, such as the possibility of the US Federal Reserve raising interest rates and Indonesia’s political uncertainties.

“We will need to see what happens in the next six to nine months, but definitely, one of the risks to Indonesia is whether the weak relationship between the legislative and the executive frustrates reform prospects,” said Srinath.

Banking, cement and property remain the favorite stocks for J.P. Morgan Securities, according to Srinath.

“Banks have done really well so far, and I think banks will lead the market from here,” he added.

On Thursday, the Jakarta Composite Index gained 0.7 percent to 4,993.88. Shares in the property sector as a group rose 1.8 percent, and the finance sector rose 1.1 percent.

Foreign investors, who made up as much as 40 percent of Indonesia’s trading activity so far this year, sold Rp 241 billion ($20 million) more in shares than they bought on Thursday.

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