Throughout 2015, the Indonesian stock market has
almost always haunted by frightening stories about the economic slowdown, one
of which related to our beneamata currency, Rupiah, which continued to slide
down from Rp12,500 at the beginning of the year, until almost reached Rp15,000 per
US Dollar in September. And the Jakarta Stock Exchange (JCI) itself continued
to drop from 5,500’s to as low as 4,120 on Sept., when the market psychology
was so bad to the point that almost everyone thinks that Indonesia could fall
into a crisis like in 1998 (but I myself had said that there will be no crisis, you can read the article in here).
Fortunately, after the September the economy
slowly but surely began to improve, where some macro indicators such as
economic growth, inflation, trade balance, all showed improvement. People are
no longer are talking about the crisis, and JCI itself gained to the level of 4,800-an.
Including the Rupiah, you may pay no attention, but it is now on the rate of
Rp13,300 per US Dollar, rose significantly compared to its bottom in September
2015, and it looks like itu will rise further. You can check the picture below,
it is clear that the trend of Rupiah appreciation against the USD has occurred
since October 2015.
You may notice that Rupiah began its depreciation
trend from 2013 ago, precisely in August, where it dropped from Rp9,500 per USD
to almost reached Rp15,000 in September 2015, along with the depreciation of
almost all currencies in the world against USD. But maybe you don’t aware that
the Indonesian central bank, Bank Indonesia (BI), was letting that happen.
Based on the statement of one of Bank Indonesia officials, fundamentally the
Rupiah exchange rate must be at about Rp13,700 per USD, or far lower than
exchange rate in late 2013 (Rp9,500 per USD). The goal? To strengthen the
balance of exports and imports (trade balance), that if the rate of Rupiah
dropped to certain points, the price of imported goods will rise and so the
import value itself will automatically decline. And if on the other hand the
value of exports remained stagnant or also decline, but the decline was not as
deep as the decline in imports, the trading balance of Indonesia will produce a
surplus, and it will have a positive
impact on economic growth. Given that the prices of Indonesian main commodities
such as coal and CPO kept sliding down since 2011, which eventually led to the
drop in the value of Indonesian exports, then there is no other way to keep the
surplus of trading balance except by diminishing the amount of imports, by way
of lowering the exchange rate of Rupiah.
Okay, then what were the results? Here’s the data.
Throughout 2015, Indonesia's export value was US$ 150.3 billion, against the
import of US$ 142.7 billion, resulting a surplus of US$ 7.5 billion, and this
is for the first time since 2011 where
the Indonesian trade balance recorded a surplus. You can see the table below,
the figures in billions of USD.
Year
|
2015
|
2014
|
2013
|
2012
|
2011
|
Import
|
142.7
|
178.2
|
186.6
|
191.7
|
177.3
|
Export
|
150.3
|
176
|
182.6
|
190
|
203.6
|
Surplus (Deficit)
|
7.5
|
(2.2)
|
(4.1)
|
(1.7)
|
26.3
|
Because the trade balance has been in surplus, and
until February 2016 it was still a surplus, the Rupiah have no more reason to
go down. So unless there are global issues that would cause the value of world
currencies, including Rupiah, to fall once again against the US Dollar, the trend
of Indonesian currency’s appreciation over the last few months is likely to
continue.
The question now is, which company that will be benefited
from the appreciation of Rupiah? In general, all of the companies will be benefited, because the appreciation reflects
the improvement in the country’s economic fundamentals. And if the economy
improves, the companies, in general, will also generate a better financial performance.
But in specifics, the most benefited are: 1. The
Companies that has debt denominated in
US Dollar, usually in the form of bonds issued in Singapore, and 2. The
Companies that its operation based on
imports, whether they imported finished goods or raw materials. The good
news, currently some of the shares of those companies are valued by the market
at very low prices. When Rupiah continued to go down for approximately two
years (between August 2013 to September 2015), companies that has a debt of USD
and companies of import-based imports posted a very poor performance during the
years. As a result the shares of these companies fell sharply, to the extent
that of some of them has been traded at PBV
of 0.5 times only, or even less than that.
However, with the appreciation of Rupiah, the
above companies certainly have a good chance to generate a better financial performance
in 2016. While the shares? Of course will automatically go up, probably with a
very significant increase up to hundreds of percent (as the shares had been dropped
insanely before). Some of these shares that caught my attention are Gajah Tunggal (GJTL), and Erajaya Swasembada (ERAA). In February
2013, GJTL issued bond in Singapore worth US$ 500 million, and the value of
these bonds in Rupiah continues to swell from only Rp5.9 trillion at the end of
2013, to become Rp7.3 trillion in September 2015. As of third quarter 2015, this
increased debt led to a net loss of up to Rp750 billion for the company. While
the shares? Dropped from its peak of Rp3,000’s per share to as low as 400,
before rise back to 700, which at that price the PBV was only 0.5 times, an extremely
low valuation for Gajah Tunggal, which held the status as one of the most famous
tire manufacturers in Indonesia.
While ERAA, an importer of mobile phones, its net
income fell dramatically since 2013 along with the higher price from the
producers (as a result of Rupiah’ impairment), but its shares has fallen even more.
In 2013, ERAA still traded on Rp3,400’s per share. But today? Only 650! Where
the price reflects PBV of 0.6 times. While just as GJTL, ERAA is also the
leader and the largest company in Indonesia for its industry, in this case the mobile
phone industry.
So now, with the rise the rupiah, the value of
GJTL’ bond is going down, so the company has a great opportunity to post a net
profit in this year. For ERAA, the cost of imported mobile phones will dropped,
so the company’s net earnings will likely to rise in the 2016. While their shares?
Well, what do you think?
In addition to the two companies, you may find opportunities
in other stocks. Another good news: Yesterday, the Indonesian Government
launched the 11-th Package of Economic Policy, and one of the policies was the
provision of credit for small enterprises with low interest rate (9% per annum),
especially for export-based businesses.
The goal is clear: To enhance the value of Indonesia’s exports, and in turn it
will increase the trading surplus (and encourage the economic growth). And if
the goal is reached, then of course the Rupiah will rise further, hopefully!
Disclosure: When this article
was published, Avere Investama (Teguh Hidayat & Partners) is in a position
of holding ERAA at an average purchase price of Rp665 per share. This
position can change at any time without prior notice.
Any inquiries about investment in Indonesia Stock Market, please send an email to teguh@averepartners.com
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