Analysts Positive on Stock Market Performance in 2017 Despite Poor Start


JANUARY 03, 2017

Jakarta. Despite a poor performance on the first trading day of the year, analysts are upbeat that the local stock market will do well in 2017, thanks to expectations that stock prices will further increase on the back of the country's steady economic growth.

The benchmark Jakarta Composite Index (JCI) closed 0.39 percent lower at 5,275.97 on Tuesday (03/01), which was the third consecutive day of losses since Thursday last week.

Recapital Sekuritas analyst Kiswoyo Adi Joe said the JCI's long-term prospect remains positive, with a projection that it may, in the best-case scenario, hit its highest level of 6,000. This would represent a 13.28 percent gain from last year's closing, with financial, property, automotive and consumption-related stocks expected to offer promising results this year.

The JCI gained 15.32 percent to close the year at 5,296.71 on Friday (30/12), thanks to a relatively stable rupiah and expectations that the country would likely post steady economic growth in 2016.

Recapital's worst-case scenario may see the JCI reach between 5,700 and 5,800, representing a 7.6 percent to 9.5 percent gain from last year's closing.

Similar optimism was expressed by Chief Economic Minister Darmin Nasution on Friday, when he said the government's push to develop infrastructure would provide the main boost in economic growth this year, while on the other hand, the country's growing middle-income class can offer promising growth for corporate performance.

The government is targeting growth in 2017 at 5.1 percent in the state budget. That would be the same as what is projected for 2016 in the revised budget.

Foreign investors, accounting to 20 percent of Tuesday's total trade, sold Rp 77 billion ($5.7 million) more in shares than they bought, while domestic investors bought Rp 78 billion more in shares than they sold.

The biggest laggard of the day was state-owned Bank Mandiri, which saw its share price close 2.38 percent lower at Rp 11,300. The lender has Rp 261.03 trillion in market capitalization.

However, there are also challenges that may drag down performance in the country's stock market, including projections by analysts that the United States Federal Reserve may raise interest rates further, and a possible drawback from US President Donald Trump's more protectionist trade policies, which may affect emerging market economies such as Indonesia.

Still, Kiswoyo shared his top picks for this year's stocks, with most of them in the LQ45 index, which tracks the country's 45 stocks with the biggest market capitalization.This includes automotive company Astra International, toll road operator Jasa Marga, consumer goods giants Unilever Indonesia and Indofood Sukses Makmur, Bank Rakyat Indonesia, Bank Central Asia and property developer Lippo Karawaci.

Three other property developers, Pakuwon Jati, Surya Semesta Internusa and Puradelta Lestari, are also in his list of favorite picks.

The rupiah weakened to 13,485 against the US dollar on Tuesday, compared to 13,436 on Friday, according to data from Bank Indonesia.