You can contact the author (Teguh Hidayat) by email, teguh.idx@gmail.com. The author live in Jakarta, Indonesia.

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Read the News Carefully!

On last August, the Jakarta Composite Index (JCI) dropped from 4,800’s on the beginning of the month, until reaching 4,484 on August, 19. The market was starting to panic at the time, but there’s another issue that more attractive to investors: The news that some public companies, in this case the state-owned banks, would buy back their shares in public. And I immediately received a lot of questions: Does this mean that I can buy the shares of Bank BRI (BBRI), Bank Mandiri (BMRI), or Bank BNI (BBNI)? Because if the company itself has decided to buy shares from the public, then the price must be already low enough, right?

Then I read one of the news, like this link. The headline was clear: ‘The bank will buy back the shares’. But if you read the news carefully, the President Director of Bank BRI, Asmawi, never said that the management plans to buy back the shares of BBRI in the near future, instead:

President Director of Bank BRI, Asmawi Syam, said that the management still learning the market situation and also the price movement of the shares of BBRI in the foreseeable future. If the stock continue to decline, the company will buy back at a specified price. However, Asmawi did not mention the price.

So the director himself considers that the stock of BBRI at the time (mid-August), was still possible to go down further. Thus, if you read only the title of the news, you would think that Bank BRI will actually buy back its shares, but it did not. And after I check the disclosure of information on the website of IDX, there has been no official statement from Bank BRI, or any other state-owned banks that they would buy back their shares in the near future.


And that’s what I call an ‘empty sentiment’, or in this case an ‘empty positive sentiment’, because the news is only a quirk of the journalists. If someone read the news wrongfully and buy the mentioned stocks, he would likely to suffer losses because the JCI still continue to fall in the next few days (so BBRI and any other stocks also went down further), until it reaches its peak (marked by panic selling, where the JCI dropped for more than 4% in just one day) on ​​Monday, August 24, at position 4,164.

But on that Monday, there were other news about the buyback, and this time the news is real. For example this link, where the Minister of State Owned Enterprises, Rini Soemarno, clearly says that the Ministry has prepared US$ 1 billion to buy back the shares of thirteen public SOEs.

And indeed, on the next day ie Tuesday, August 25, the JCI began to rebound.

So, as an investor, it is important for you to read the news related to the stock market carefully, so that you can recognize which news is real, and which news that are merely the result of quirk. It is not that hard, actually. And if you find a good quality stock that dropped because of some bad or negative news, but you found out that the news is ‘empty’, then usually it is an opportunity. Because when the news is forgotten as time went by, the stock would eventually rise back.

And yes, sometimes it would give me a short-term profit :) All you have to do, once again, is to read the news carefully.

Any inquiries about investment in Indonesia Stock Market, please send an email to teguh@averepartners.com

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