Consumer Goods
Makers, Banks Among Top Stock Picks of Indonesian Fund Managers
investors are likely to target buying shares in consumer goods
makers and banks in Indonesia’s equity market as the economy continues to grow
on rising personal spending, shrugging off concerns of borrowing costs rising
on the back of a pick-up in inflation. Fund managers contacted by Jakarta Globe
said they would put their money in consumer-related stocks and financial stocks
as their main trading bets this year. Jeffrosenberg Tan, who helps manage funds
at Sinarmas Asset Management in Jakarta, said that demand by the country’s
consumers for snacks and other basic food staples during the elections will
increase. “I think consumer goods would have a good year as we are having the
elections and with the recent flooding, sales at consumer good companies are
likely to increase,” Jeffrosenberg told the Globe on Friday.
He declined to mention his best picks. Major consumer goods
companies in Indonesia include Indofood Sukses Makmur and Indofood CBP Sukses
Makmur, Mayora Indah and Unilever Indonesia. Shares of Mayora, which sells
brands of biscuit such as Marie Roma, Slai O’lai, Better and Sari Gandum, rose
0.6 percent to Rp 27,015 on Friday last week compared with a 1.3 percent
decline in the main stock measure, the Jakarta Composite Index. For 2013,
Mayora’s shares rose 54 percent compared to the JCI’s 1 percent drop. Shares of
Indofood, which closed unchanged at Rp 7,275 on Friday, have risen 10 percent
this month. Unilever Indonesia declined 1.8 percent to Rp 28,075 on Friday, but
rose about 8 percent this month.
Unilever’s consumer products range from shampoo and soap to ice
cream and bottled water. Some economists in Jakarta have said that legislative
and presidential elections from April to July will likely prompt a spending
spree by political parties to entice more votes.
Personal spending accounts for about half of Indonesia’s
economic activity. Nurdiaz Pattisahusiwa, chief investment officer at Manulife
Aset Manajemen Indonesia is recommending some banks for investors. Nurdiaz, who
helps manage Rp 44 trillion ($3.6 billion) in assets at Manulife, said that
amid high interest rates this year the country’s largest banks managed to
maintain performance thanks to their ability to manage costs.
Banks have been impacted
by the rising interest rate,” said Nurdiaz . However, not all banks are equal,”
he said, noting that large banks had better loan-to-deposit ratios, allowing
them to maintain loan expansion and boost profit. Net income at 120 commercial
banks in Indonesia grew at a slower pace in the first eleven months of last
year as they coped with high interest rates that have continued into 2014. Combined
profit at those lenders rose to a total of Rp 98.5 trillion in the
January-November period last year, up 16 percent from the same period a year
earlier, data from Bank Indonesia, the central bank, showed on Friday.
The central bank increased its benchmark interest rate by a
total of 1.75 percentage points to 7.50 percent last year as part of efforts to
halt inflation from accelerating, curb domestic demand and contain the rupiah’s
decline against the dollar.
The rupiah lost 26 percent of its value
last year, and a weak rupiah makes imports more expensive but at the same time
boosts exporters’ competitiveness. Nurdiaz said that investors in the stock
market are buoyed by general elections this year, as spending tends to
increase. In an election year, stock indexes tend to increase, as investors
love a ‘reform story.’ This is true in China, this is true in India, this is
also true in Japan.”
In past election years, the JCI has climbed as high as 60
percent, and Nurdiaz expects it to gain 10 percent to 22 percent in 2014.
The JCI has risen 3.8 percent so far this year. Spending from candidates will
boost money circulation and domestic demands,he said. Media reports estimated
Rp 40 trillion of additional spending from legislative and presidential
candidates this year.
Nurdiaz’s picks are in the consumer and media sectors, which
would benefit from spending in the general election. The infrastructure sector,
cement and heavy machinery will also benefit if leading presidential candidates
are consistent with their campaigns to boost the country’s infrastructure,”
Nurdiaz said. Meanwhile, spending in the automotive sector and property sector
would tend to be flat, according to Nurdiaz. Amid tighter liquidity conditions,
consumers tend to delay big spending [on items] such as a car or a house.”
source : jakarta globe
