Jakarta. Indonesia's main stock market looks strong this year with analysts confident that the benchmark Jakarta Composite Index, or JCI, could exceed market expectations on the back of faster economic growth, a report by local brokerage firm Bahana Securities shows.
Harry Su, head of research at Bahana Securities, said in an equity report received by the Jakarta Globe on Monday (05/07) that the JCI may hit the 6,300 level at some point this year, bolstered by the positive impact of an upgrade by global rating agency Standard & Poor's of Indonesia's sovereign rating to investment grade in May, following similar moves by the other two rating agencies – Fitch Ratings and Moody's Investment Services – years earlier.
Analysts see the rating upgrade as a sign that Indonesia has strong economic fundamentals, which would affect companies and their stock performance on the JCI.
The JCI declined 0.69 percent to 5,825 on Wednesday after a record on Monday, when it closed at an all-time high at 5,910. The previous record was on May 19, when it hit 5,791.88.
On top of the rating upgrade, Bahana noted that market optimism will be bolstered by the government's plan to increase state spending in the third and fourth quarters this year and steady domestic consumption, a stronger investment realization and the expected improvement in export performance.
Finance Minister Sri Mulyani Indrawati previously said the country's economic growth this year will probably exceed the government's official target and reach 5.2 percent as her ministry expects exports to improve this year.
Despite the annual inflation rate having accelerated slightly in June from a year earlier due to the increase in demand during the days leading up to the Idul Fitri celebrations, the government is positive that it can keep inflation in check.
Indonesia aims for an annual inflation rate of 4 percent this year, as stated in 2017 state budget. The government sought to manage volatile food prices and issued a law on the matter.
Top-10 Stock Picks
Bahana's top-10 picks of company stocks are:
1. Diversified conglomerate Astra International, with the target price (TP) at Rp 10,000 sometime this year. It closed at Rp 8,800 on Wednesday
2. State-controlled lender Bank Mandiri (TP: Rp 15,000 – closed at Rp 13,325)
3. State-controlled lender Bank Negara Indonesia (TP: Rp 8,000 – closed at Rp 6,650)
4. State-controlled cement producer Semen Indonesia (TP: Rp 11,600 – closed at Rp 9,950)
5. Indonesia's fifth-largest lender by assets Bank CIMB Niaga (TP: Rp 1,500 – closed at Rp 1,215)
6. Property developer Ciputra Development (TP: Rp 1,800 – closed at Rp 1,195)
7. Local retailer Mitra Adiperkasa (TP: Rp 8,300 – closed at Rp 6,150)
8. Free-to-air television station operator Surya Citra Media (TP: Rp 3,350 – closed at Rp 2,350)
9. Department store operator Ramayana Lestari Sentosa (TP: Rp 1,440 – closed at Rp 1,100)
10. Heavy equipment distributor Astra International United Tractors (TP: Rp 32,000 – closed at Rp 27,825.)