Jakarta-based Bahana Securities said the Indonesian market is reeling under a triple whammy of US quantitative easing concerns, rupiah weakness and higher interest rates.
“These factors have caused a near 12-percent market pullback since recent peak at 5,215. Note that back in 2005 and 2008 when the government implemented fuel price hikes, the index corrected 12 and 16 percent respectively over a period of one month,” Bahana’s head of research Harry Su said in a note on Wednesday.
“At this stage of the cycle, we advise investors to begin accumulating stocks at around the 4,400-4,500 level with the view of adding to positions in the event the market would overshoot on the way down.”
The research house also said the market is more sensitive to rupiah depreciation, partly as listed Indonesian companies have managed to repair their balance sheets since the Asian 1998 financial crisis. The Indonesian market’s net gearing this year is at 31.9 percent, down from 38.5 percent in 2012.
Indonesia’s stock index was down 0.95 percent.