JCI AT RECORD HIGH EVEN AS FOREIGN TRADERS PULL OUT
Tougher scrutiny from tax, Customs authorities prompt more investments in stocks
YUNUS Irianto, a 61-yearold shop owner, here, has been putting more money into his bank account and trading stocks as his business suffers.
“My sales these days are about 40 per cent or even half of what they used to be in 2014,” said Yunus, who sells computer hardware and WiFi routers in Mangga Dua, one of the busiest trade districts in the Indonesian capital. “I prefer to put money in the bank or trade stocks, hoping to get more out of it.”
His behaviour may explain why the Jakarta Composite Index (JCI) is at a record high despite the recent risk-off sentiment that had caused global investors to sour on Asian markets.
Foreigners pulled a record US$2.1 billion (RM8.88 billion) from Indonesian equities in the third quarter, according to data.
Local businesses now faced tougher scrutiny from tax and Customs authorities as part of a government campaign to boost tax revenues, said Jeffrosenberg Tan, head of strategy at PT Sinarmas Sekuritas.
That’s prompting investors like Yunus to put their money to work in stocks or park it in savings accounts.
Household consumption, which accounts for more than half of the country’s gross domestic product, was weaker than expected in the second quarter. At the same time, the Customs authority has tightened checks on imports in the past year, making it harder or more expensive for some to ship in goods.
Jemmy Paul, investment director at PT Sucorinvest Asset Management, said above-average valuations and a weak external backdrop made the rally prone to reversal.
The JCI traded at 16 times blended forward 12-month earnings, compared with its five-year mean of 14.6 per cent, data showed. The benchmark gauge gained as much as 0.6 per cent to a record high of 5,936.138 yesterday.
“Valuation is getting very expensive and the rally has been so far supported only by blue-chip stocks and local investors,” said Paul, whose firm outperformed 97 per cent of peers over the past year.
Slower-than-expected execution of infrastructure projects, external pressure from a potential United States Federal Reserve rate rise and a tax amnesty programme that hadn’t translated into increased property sales were among the factors that led to overseas funds selling Indonesian equities, said Alan Richardson, a fund manager at Samsung Asset Management. Bloomberg