You can contact the author (Teguh Hidayat) by email, The author live in Jakarta, Indonesia.

See my pictures in Instagram, @teguhidx.

The Battle Begins! Jokowi vs Prabowo

One of the most important issues after Joko Widodo (Jokowi) officially run for President, is about his running mate (for vice president). And after several delays, eventually announced that the mate is Jusuf Kalla or JK. Coincidentally, if we see JK’ good track record as a vice president of Republic of Indonesia during the period 2004 - 2009, JK is a figure that is desired by the stock market. As a result since last Friday and also continues to this day, JCI rise to 5,000's positions. The question is, of course, what's next?

In the article titled Jokowi, ARB, or Prabowo?, I said that among the three presidential candidates, only Jokowi that would bring a positive impact on the stock market if he is elected. However, since Jokowi’s political party, the PDI-P, hasn’t gained vote of 20% or more  in the legislative elections, then the party must form a coalition with other parties, which was meant that Jokowi can not elect his running mate by his own, as did President Susilo Bambang Yudhoyono when he chose Boediono as vice president in in 2009. The problem is, of course, what if the mate is a figure that the market does not like?

But fortunately, it is JK that chosen, although it means that JK must resign from the Golkar Party because Aburizal Bakrie (ARB) as Golkar chairman clearly states that the Party should support him only, either as the candidate for president or vice president.

At first glance, Jokowi-JK will easily win the election even though without support from Golkar as the other major party. But the greatest threat would come from another pair of presidential candidate: Prabowo - Hatta. If you notice, regardless of Hatta Radjasa which apparently as nobody, Prabowo’s electability rising steadily in recent weeks, and it was not without reason. One of the problems of Jokowi is the fact that in contrast to Prabowo who is the leader of his party (Gerindra), Jokowi just a cadre in the PDI-P, not the leader.

And can you imagine, Indonesia is led by a President who has a boss in his political party? Once resign from Golkar, JK is no longer a subordinate of ARB or anyone else, but an independent person. While Jokowi? Well, he is, like it or not, is a subordinate of PDI-P’ leader, Megawati. I personally do not really care about this, but for some people, this is a serious issue. There are many Jokowi’ supporters who later moved to Prabowo after Megawati herself asserted that Jokowi is just an 'party’s officer'.

While Prabowo, his campaigns clearly show that he is a presidential candidate that is strong, authoritative, and can not be dictated by anyone. And for some people this is an ideal criteria for a country’s leader, which it is not present in Jokowi.

The point is, the result of presidential election in next July is not predictable at all, as Prabowo obviously still have a chance, depending on how he and his team were able to maximize the remaining time available for campaigns etc. Another candidate, ARB - Pramono Edhie (if they’re actually running), may be the deciding party if the election lasted two rounds, where the chances of Jokowi will be smaller if ARB join the camp of Prabowo (and it’s likely to happen, because in their history, Golkar has never had coalition with PDI-P, while Prabowo is the former cadres of Golkar before running his own party, Gerindra).

Then how about Jakarta Compiste Index (JCI)?

After JK officially selected as running mate for Jokowi, the foreigns again scramble into the stock, so that the amount of foreign funds that entering the Indonesia Stock Exchange at this point has reached Rp40 trillion (abour US$ 4 billion), or the largest in history, and in fact it’s only May or five months since the opening of the year 2014. This certainly raises a bit of concern because if these foreigners sell out their stocks, then in the short term JCI will fall down. The JCI itself so far gained 18% since the beginning of 2014, the highest since 46.1% rise in 2010. So yep, the market is currently in a state of optimistic in welcoming new leader of the Republic.

But what about the future? Or at least until the end of 2014? Beyond the presidential election euphoria, we might look at the results of first quarter of 2014, where the top companies on the Stock Exchange (bluechip stocks) recorded a fairly good performance despite the Indonesia’s economic slowdown in 2013. While the two sectors that had excellent performance in the past but became the bottleneck of JCI rise in the last two years, the coal mining and oil palm plantations, they began to show improvement in this 2014, and the stocks of coal also started to climb up recently. Then the sector of property, although its performance is down, but because since the beginning the valuation of stocks in this sector is still low, then it does not cause the stocks to be down (since the beginning of the year 2014, the stocks in property sector had rose 32.3%, the highest among others). And construction sectors, their performance in 2014 was relatively good, and after coupled with their excellent outlook along with the development of many infrastructure projects in Indonesia, then the stocks in this sector are also up again (but they become overvalue again).

In conclusion, regardless of the presidential election euphoria, the performance of the public companies is supporting the rise of JCI, and indeed JCI so far has gained 18% since the beginning of the year. It is possible for JCI to rise even higher, given that the presidential election euphoria is likely to persist until the election in July, especially if Jokowi is finally elected as President.

Historically, however, JCI always have a period of correction at least once a year, which May and beyond is a period that the correction is likely to occurs. In 2010 and 2012 JCI correction occurred in May, then in 2011 the correction happened in August, and in 2013 took place in June. This year of 2014 is likely to be an exception where the story of 'Sell in May and Go Away' did not happen, but the next question is, when the correction will happen? And how deep it’ll be?

But whenever the JCI will down, or even never down at all, it should not be a problem because in the end the index will continue to rise in the long term. Only one thing that might be noted here: Whether you realize it or not, the government of President Yudhoyono during the last ten years (2004 - 2014) has been successfully brought JCI to rise up to five-fold, from 1,000’s in early 2004 to current position at 5,000’s, where the rise was in line with the national economic growth, and it even includes a period of crisis in 2008. And I think it would be difficult for the subsequent president, whether it’ll be Jokowi or Prabowo, to be able to build a similar achievement by bringing JCI to gain 400% in ten years. Make no mistake: Some excellent financial performances achieved by Astra International et al, it would not be realized if the national economy itself was in a mess, would it?

Well, actually I would write an article about stock analysis or investment education as usual, but the story about the presidential election is too interesting to be ignored, including by us all as stock investors. So I would make a small survey, where you can answer the following questions:

  1. Which figure do you think will win the presidential election? It’ll be Jokowi or Prabowo? Or even ARB?
  2. Then, how about the market reaction if Jokowi/Prabowo wins?
  3. And in the long run, let say the next five years, what about the performance of our new president on the national economy?

Update: At the last moment, Golkar officially join the Gerindra! Thus we can be sure that the next presidential election will be a death match between Jokowi versus Prabowo alone, and this time the strength of both parties are arguably equal, or even Prabowo is superior because he is supported by six political parties, while Jokowi only four. Well, it just became more and more exciting, ladies and gentlemen!

No comments: