SOE Stocks Sink as Earnings Concerns Mount

JULY 08, 2015

Jakarta. Shares of Indonesia’s major state-owned enterprises are taking a big hit in the local stock market as investors are spooked by the national economic slowdown and greater government intervention, according to analysts.

Indonesia’s main stock gauge and those of its regional counterparts have been in the red this week, dragged down by negative market sentiments after the Greek referendum result on bailout plans.

In the past three days alone, the Jakarta Composite Index (JCI) has lost 2.2 percent to 4,781.57, leading to a 7-percent drop since the beginning of the year. Among the top ten losers so far this year include Bank Rakyat Indonesia, the country’s biggest bank by assets, and cement maker Semen Indonesia.

Shares of Bank Rakyat Indonesia fell 2.4 percent to Rp 10,225 on Tuesday, down by 12 percent year-to-date. The state lender holds a market capitalization of Rp 255.3 trillion ($19.12 billion).

Another state enterprise, Semen Indonesia, which has a market capitalization of Rp 68.5 trillion, lost 0.86 percent to Rp 11,525. It has fallen by 28 percent since the beginning of the year.

Meanwhile, toll operator Jasa Marga dropped 2.1 percent to Rp 5,875, falling by 17 percent since last December. It holds about Rp 40.6 trillion in market capitalization.

“Investors have been clearing away from state-owned enterprises because they’re vulnerable to government intervention, such as lowering cement prices and discount on toll roads,” Kiswoyo Adi Joe, an analyst at Investa Saran Mandiri, told reporters in Jakarta on Wednesday.

Kiswoyo added that investors are also losing interest in state enterprises due to the government’s upcoming Rp 39.92 trillion capital injection, which aims to increase state enterprises' capacity in infrastructure development. In listed state companies, the capital injection will come in the form of a rights issuance, which is feared to dilute public ownership.

Still, state constructions firms such as Wijaya Karya and Waskita Karya still have some opportunities ahead, according to Kiswoyo.

“If infrastructure development pans out, construction stocks should be able to support the index,” he added.

Haryajid Ramelan, chairman of the Indonesian Association of Securities Analysts (AAEI), pointed out that the domestic and global economic slowdown has also affected the performance of state enterprises in the stock market.

The Asian Development Bank and World Bank revised down their forecasts for Indonesia's economic growth to 5 percent and 4.7 percent respectively, correcting their rosy outlook of late last year on the back of President Joko Widodo's moves to cut gasoline subsidies to push infrastructure spending. The spending, though, has barely materialized so far this year due to red tape.

Adding to the concerns of companies in Indonesia, the rupiah has depreciated by 7.3 percent to 13,346 against the US dollar since the beginning of the year, data from Bank Indonesia showed.

“Under current conditions, most investors would rather wait for more certainty, but that hasn’t appeared,” he said.