------Original Message------
From: Dadi Budiana
To: SbudianaC
To: Lili
Sent: Feb 13, 2008 9:01 AM
Subject: Indonesian Shares
Dari Wall Street Journal hari ini.
HEARD IN ASIA
Indonesian Shares Offer a Hedge
Against Global Economic Stress
By YAYU YUNIAR
February 13, 2008
JAKARTA, Indonesia -- For investors looking for a hedge amid global
economic worries, Indonesia's stock market may be worth a look, many
analysts say.
The Jakarta Stock Exchange's Composite Index has slipped 5.6% this year,
roughly tracking U.S. stock indexes. But the outlook for Indonesia's
economy, Southeast Asia's largest, remains robust and relatively
unaffected by problems related to subprime loans.
That makes Indonesia, like neighboring resource-rich Malaysia, a Southeast
Asian country where resilient growth could make certain stocks attractive.
The reason: Indonesia's stock market is heavily weighted toward the
domestic economy, with the telecommunications and banking sectors
accounting for almost half the market's total capitalization.
Manufacturers, which would be most directly affected by a U.S. slowdown,
are largely unlisted. And shipments to the U.S. -- mainly textiles,
garments and shoes -- account for only 11% of the nation's total exports.
Even the export sector is relatively insulated against knocks from a
sluggish U.S., as almost two-thirds of Indonesia's total exports are
commodities, such are coal, nickel, plywood and palm oil. Huge demand from
China and India has continued to prop up commodity prices, boosting
Indonesian growth.
"Indonesia is relatively immune to external shocks," says David Fergusson,
head of Indonesian research at Citigroup Global Markets.
Most economists forecast 6.5% growth in gross domestic product this year,
in line with government forecasts, after 2007 expansion of 6.2%. Some
economists have recently trimmed growth targets to about 6.2% because of
jitters in the U.S., but that is still a healthy rate during economic
turbulence.
One reason for the optimism, according to some economists, is that
Indonesia is still in the early stages of a capital-investment cycle,
after remaining stagnant for many years following the 1997-98 Asian
financial crisis. The corporate sector hasn't taken on large amounts of
debt, and banks are awash with cash to lend, which optimists argue is
likely to support investment and consumer spending.
"We expect Indonesia to enter a robust consumption phase in 2008," says
Joshua Tanja, head of Indonesia research for UBS.
The government also is planning to spend 61.9 trillion rupiah ($6.67
billion) this year to improve the country's decrepit ports, roads and rail
network, giving a further boost to investment. And foreign direct
investment more than doubled last year from 2006, to $10.34 billion.
The Composite Index closed yesterday at 2592.07, down from 2745.83 at the
end of 2007. Last year, the index climbed 52%.
Other Asian markets generally have fared worse than Indonesia this year.
India's benchmark Sensex and Hong Kong's Hang Seng Index each has shed
18%.
Many analysts say Indonesian stocks could continue to face volatility in
the short term but should stabilize and trend higher later this year.
DBS Vickers Securities Indonesia strategist Agus Purnomo has a 12-month
target of 3040 for the Composite Index, up 17% from yesterday's close.
Rani Sofjan, head of equity research at Mandiri Sekuritas, expects the
index to reach 3200 by year end -- a 23% rise from yesterday's finish. The
firm forecasts that earnings per share for Indonesian companies will grow
15% on average this year.
Mandiri says Indonesia looks comparatively attractive when dividing the
market's 12-month rolling price/earnings ratio, 14 in late January, by
projected EPS growth, 15. Indonesia's P/E ratio comes to 0.9 times
earnings growth, compared with 2.5 for Malaysia and 2.1 for Singapore,
based on estimates from FactSet Research Systems Inc. The ratio is 0.8 for
the Philippines. Indonesia's economy could stumble if high global oil
prices fuel domestic inflationary pressure. Despite being a member of the
Organization of Petroleum Exporting Countries, Indonesia is a net importer
of refined oil products and susceptible to cost-push inflation, that is,
rising prices on the heels of rising costs.
Interest rates also are a question mark. Lower rates last year underpinned
the economy's strong growth. For now, the benchmark rate is stable at 8%.
But the central bank could be forced to increase rates this year if oil
prices rise further, crimping domestic demand, many economists say. Higher
oil prices would also force the government to spend more for subsidies on
fuel and other oil products and less on infrastructure.
Indonesian bulls say investors should buy shares that are largely
insulated from the U.S. economy and those that could benefit from higher
oil prices.
Their favorites include Bank Rakyat, oil producer Medco Energy,
state-controlled Telekomunikasi Indonesia and Semen Gresik, a cement
company.
State-controlled Bank Rakyat makes two-thirds of its loans to small
borrowers, mainly in the agricultural sector. Many analysts expect the
bank to do well amid growth in rural spending over the next 12 months, in
line with higher commodity prices. J.P. Morgan has a 12-month price target
for Bank Raykat shares of 8,300 rupiah, 23% above yesterday's closing
price of 6,750 rupiah.
Medco Energy, which has oil and gas operations in Indonesia and Libya, "is
a direct beneficiary of high oil prices," says Mr. Purnomo of DBS. He has
a 12-month target for its shares of 6,900 rupiah, 92% above yesterday's
close of 3,600 rupiah.
Indonesia's telecom sector, meanwhile, should do well as consumer spending
continues to increase. Citibank projects consumption will rise 5.4% this
year, compared with 4.7% last year. Only one in three of Indonesia's 240
million citizens owns a mobile phone, a much lower level than in the
Philippines, where 60% of the population has a cellphone.
Many analysts recommend Telkom, which has a 65% stake in Telkomsel, the
nation's dominant cellphone provider. Telkom is a very liquid investment;
it is the largest stock on the Indonesian exchange, accounting for 15% of
market capitalization. Citigroup has a 12-month share-price target of
13,000 rupiah. Yesterday, the shares rose 2.1% to 9,750 rupiah.
Write to Yayu Yuniar at [EMAIL PROTECTED]
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