If we look at the movement of Jakarta Composite Index (JCI) in the last few
months, where the index rose sharply on March 14, 2014, when Jokowi
officially run for President, and dropped dramatically when Prabowo gain
support from Golkar Party, then it is clear that the majority of stock market
participants (regardless of personal choice of individual investors) prefer
Jokowi as President. However, first you have to realize that the number of
investors in the Indonesian stock market was less than 500 thousand people, aka
very small compared to the total population of Indonesia, which reaches more
than 250 million. So even if all the stock market investors elect Jokowi, then
it's not a guarantee that Jokowi will win the election.
And if you take a look around (outside the room of stock market), then you
will find out that the supporters of Prabowo are approximately as many as the supporters
of Jokowi. I think that the chances of the two candidates to win the election are
equal.
The question is, what if the winner is Prabowo?
A few days ago, Deutsche Bank released a survey which concluded that if
Prabowo win the presidential election, then the investor will sell 56% of their
assets in Indonesia, where the 'assets' are including the company's shares that
traded on the Stock Exchange. This means that, if the survey was correct, then the
JCI will be dropped on the 10th of July if the quick count results showed that
Prabowo - Hatta superior over Jokowi - JK, and the decline may continue in the
coming days which the JCI will have difficult times as it had in June -
December 2013 ago.
ENDD
However, I think it is too much if someone thought that the victory of
Prabowo would bring an 'end' for the Indonesian stock market. Because in the
end, the movement of JCI in the long term, let say five years, is depends on the
fundamental performance of the national economy, including the financial
performance of listed companies. The JCI might down (just might, you can’t be
sure) if Prabowo win the presidential election, and it was due to concerns that
his policies will be less favorable for the stock market, especially when quoting
his recent statements (Prabowo once said that the stock trading was a gamble).
But if it turns out that his policies have a positive impact on the national
economy as a whole (not just the stock market), then the effect on the stock
market will remain positive. Make no mistake. If JCI rose steadily while the listed
companies have declining financial performance and there are lots of
unemployment out there, then it was an 'empty' rise, and it is only a matter of
time before the stock index will fall apart. But if JCI goes down while the
economy goes just fine, then of course it is an excellent opportunity to buy a
lot of undervalued stocks.
The problem is of course, we do not know whether Prabowo will be able to
bring a better national economy, or at least as good as today (the government
of President SBY have arguably been successful in managing the economy in the
last ten years). Some of you might argue that Indonesia will have a good time
under the leadership of Prabowo, but some may argue otherwise, that Indonesia
will enter a period of darkness if the former commander of Indonesian Special
Forces elected as President. Which is right? That, we do not know.
However, based on the history of the beloved Republic, if Prabowo cannot
meet the people’s expectations of prosperity, etc., then trust me, he will not
stay too long in the State Palace.
Because, if you remember, the first President of Indonesia, Sukarno, had
successfully maintained his position until more than 20 years, as he was very
good in building the nation’s sovereignty, military, etc., even made a good
friend with the U.S. President at the time, John F. Kennedy.
And did you know that in 1948 and 1949, Indonesia was led by two President
other than Sukarno? They are Syafruddin Prawiranegara and Assa'at. However,
because these two figures were ‘nothing' compared to Sukarno, then they are
only able to occupy the post of president in a very short time, and also tends
to be forgotten in the books of history.
Then in 1967, when Suharto promoted as President, Indonesia entered a new
phase of economic development. And it turned out that Suharto successfully maintained
its position as the leader of the nation until finally stepped down in 1998.
Why? Well of course because for more than 30 years when he was in power, like
it or not, he is able to carry out the development and welfare of the people.
The critics, activists, and economists may say whatever, but that's a fact. If Suharto
was not able to keep the economy for running well, then he will be deposed
immediately by the people of Indonesia itself. The proof? Well, when the
financial crisis hit the country in 1998 and the government failed to do
nothing, he was immediately stepped down as the president, right? If the crisis
occurred in the 1980s, for example, then perhaps since the 1980s, the President
of Indonesia was not Suharto.
After the era of Suharto, in the period of 1998 - 2004, some figures had
occupied the office of President. They are B. J. Habibie, Gus Dur, and
Megawati. All the three characters have failed to complete their terms, and
it's because of what? Because they were not good enough in carrying out their
duties as head of state. That's it! If President Megawati had the same ability
like his father (Megawati is a daughter of Sukarno, the first President of
Indonesia), she would not lose the 2004 Presidential Election.
Furthermore, President Susilo Bambang Yudhoyono. Regardless of the many
weaknesses in his self, yet most of people has satisfied with SBY's performance
so he was successfully completed his post until a full of ten years. In his
reign, the national economy grew significantly, and even the stock market has
developed very well since 2004, including successfully passing through
difficult times in 2008. I think in two or three centuries from now, the
history will probably forget the names of Habibie, Gus Dur, and Megawati as
Presidents of the Republic (because their reigns are too short), but the name
of SBY is not likely to be forgotten.
Then what about Prabowo? Well, it is the same. If later his performance did
not satisfy the people, then he would only occupy the office for a term of five
years or even less, to be replaced by another figure. Unlike the positon of
governor, state’s minister, member of the house of representatives and the like,
where a movie celebrity could suddenly become a member of the House, the position
as a President is sacred where only selected individuals can occupy the office
for a long time period.
Thus, although everybody wants to be the President, such as Rhoma Irama,
Wiranto, Aburizal Bakrie, Gita Wirjawan, until Farhat Abbas the comedian, but
because they did not have the capability for it, then they’re immediately
eliminated from the nominations. If from these names only elected two
candidates, namely Jokowi and Prabowo, then they are the most capable to be
President.
And if later Prabowo (or Jokowi) elected as President but subsequently
proved incompetent, then he will not be too long in the office because he will
soon be replaced by another candidate.
In conclusion, if you ask me about what would happen on the JCI if Prabowo
wins the election, then I would answer that the index may be dropped in the short
term. But in the long run, it will depend on how the performance of Prabowo -
Hatta on the national economy, and you can not say that the economy will be
destroyed even if you are supporting Jokowi, because you do not know about
that. Related to whether the stocks of Bakrie will go up if Prabowo wins the
election (because Aburizal Bakrie will get the position of 'prime minister'),
then it is beyond the concern of mine, because even if Bumi Resources (BUMI)
skyrocketted to Rp1,000 per share, I do not care. What is clear that if Prabowo
could not control his political friends and subordinates to be at least not
corrupt, then it is the people who will punish him, where he will not be too
long in occupying the Palace.
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