Until Monday, January 9,
the trading volume on the Indonesia Stock Exchange (IDX) is fairly low with an
average transaction value of only Rp5.25 trillion (US$ 400 million) per day
since the beginning of the year, or far below the usual Rp6 - 7 trillion (about
US$ 450 – 550 million) per day. This situation may raise the question: What’s
happening? Actually the stock market is usually crowded with transaction at the
beginning of the year, is not it? Then how about the outlook for Jakarta
Composite Index (JCI) for the year 2017? Okay, let’s talk about it.
If you are confused by
the current ‘quiet’ condition of the market and also the stagnation of JCI,
then remember this: In the medium and long term, the movement of JCI and any stocks
will be influenced by the fundamental performance of the companies as well as
the performance of macroeconomic fundamentals of Indonesia. While in the short
term, in this case three months or less,
the movement of JCI will be influenced by the news or any sentiments on the
street/media. If the sentiment is positive, the JCI will rise, but if bad, the
stock indices will drop.
But what if there is no
such sentiment like today? Then of couse, the JCI will not go anywhere aka stagnant,
while the value/volume of stock transactions will be small because people who
own stocks will not sell their holdings, and on contrary, those who still own
cash will wait n see from the outside.
That’s first, related
to the lack of sentiment. Secondly, based on experience, regardless of whether
the JCI will rise or drop by any percentage in a given year, the stock traders
and investors will be eager to do the stock trading activities at the beginning
of the year only if the JCI had
increased significantly in the previous year, and that ‘habit’ can be
explained: If you made big money in 2016, then you would be eager (and
optimistic) to make an even bigger money in this 2017.
But if you portfolio is
in losses, or in profits but not as high as expected? Then of course, psychologically,
you would be less eager to buy more stocks. Actually the JCI made a decent
return of 15.3% throughout 2016, but the majority of investors were likely made
lower returns, because they only entered the market in the middle of the year
when JCI has already risen to the level 5,000's, ie when the booming story of tax amnesty just began. While at the
beginning of 2016, when the market was still not fully recovered from the mini-crash
in 2015 plus the fall of the Shanghai Stock Exchange (in June – July 2015,
the SSE
indices slashed from 5,178 to 3,383 in just one month), not to mention
negative sentiment related to the
decline in oil prices, to issue of limitation
of banking’s net interest margin (NIM), then the decision to buy any stocks
would appear to be a foolish move, and any analysis that concluded that the JCI
would rise to 5,000 would be called ‘does not make sense’.
In essence, although
some of you may succeed in making large gains from the
euphoria of tax amnesty, the rise of state-owned stocks, to the booming of coal,
or simply because you were able to enter the market since early 2016, but the
performance of most investors were likely not good enough to beat the market (it
can be seen from the average performance of mutual funds), and it psychologically
affects their optimism in facing the new year of 2017, thus the market became
quiet, almost as quiet as in early 2009, ie after everyone suffered huge losses
in the market crash in previous year (2008).
The Outlook for 2017:
Fundamentally Good!
However, we know that also
in the year 2009, the JCI instead skyrocketed for a record of 87.0% during the
year, which means that the slow movement
of the JCI at the beginning of the year does not mean that the stock indices
would be fall apart on that year, absolutely not! In fact, in some cases
such as in 2009 and also in 2016, the quiet periods of the market at the
beginning of the year were actually a big
opportunity for smart
money, ie any individuals or institutions who are able to analyze deeper
into the fundamental factors rather than just watching the ups and downs of the
JCI (or the stock price), so they can buy stocks early when the prices were
still cheap, thus the profit would be bigger.
Then how about this
2017? Whether the currently quiet market at the beginning of the year is also
an opportunity to buying stocks early before others, just like we did in 2009
and 2016? But what if it turns out that the market would be quiet, or even
dropped, for the whole year?? Well, there are actually a lot of factors that must
be analyzed to answer these questions, but to make long time short, I will
invite you to see only two of them.
First, in the last ten
years, regardless of the movement at the beginning of the year, but the JCI
will likely to rise much in a given year if it was dropped in the previous year.
In addition to 2009 and 2016, JCI also gained a lot in 2014 (22.3%), partly
because in 2013, the JCI dropped 1.0%. Based on this hypothesis, the JCI will probably
will not rise much in 2017, or it could even go down, because in the previous
year (2016), it rose 15.3%.
Nevertheless, take a
notice: The rise of JCI during 2016 was supported only by big cap stocks like Astra
International (ASII), and Telkom (TLKM), even not all of them because some other
big caps like PGAS, SMGR, BBNI, their prices weren’t going anywhere (even JSMR
went down instead). While the second liner stocks, ie the group of stocks with
the largest number of members in the market (in the Indonesia Stock Exchange, there
are only about thirty big cap stocks with market cap of more than US$ 1 billion
each, while the rest is considered small caps), also did not go anywhere, and even
some of them are still in their bottom
position in the last five years. Also, even though the coal stocks have
risen tremendously throughout 2016, but do not forget that before that, they
had been down for a long time since 2012, so their current position is actually
still low.
 |
| PT Bukit Asam, Tbk, one of the best coal stocks in IDX in terms of fundamentals, but also with premium share price. |
In short, although
there are exceptions for certain stocks that already rise much either because
it was ‘boiled’ (the last one is BJBR), or purely because of natural market
mechanisms, but currently most of the
stocks in the stock exchange haven’t risen much since the beginning of 2016.
Yes, these stocks rose a lot in the mid of 2016 during the euphoria of tax
amnesty, but later they went down once again. As a result, the current market
position is more or less the same as the beginning of 2016, so I could say that
at this time, there are quite a lot of
stocks that are sold at a discount! So our job is to sort it out, which
stocks that are fundamentally good.
Second, if you have
been in the market for a long time, your market
sense will be well formed, and consequently you will be able to sense if there is something wrong with
the market. And I kid you not, these ‘senses’ are real, and I can prove it. In 2013,
the fall of coal and other commodities caused the national economy of Indonesia,
which previously continued to grow rapidly, began to falter, and in August I
could see that it will negatively affect the JCI (you can read again the
analysis here), so I decided to sell almost all of my holdings just before
the JCI actually fell. Then in 2015, the national economy was once again in a
depressed condition, indicated by (among others) the fall of Rupiah against US
Dollar, so in March I already concluded that the JCI may be down for that year,
you can read again the
analysis here. A little reminder, in March (and also in April 2015), the JCI
just kept breaking new high to the level of 5,500's. So if you suddenly say
that the market will crash anytime soon, then you will be accused of being a
'hate speech' spreader.
But later, the JCI was
actually dropped in 2013, and dropped once again in 2015. In this case I did
not saying that I can predict the market, not at all! I of course have no idea
where my stocks will going in this year, 2018, 2019, and so on. What I’m saying
is that, once again, if there is something wrong with the market, then if you
are experienced enough, you will naturally sense it, so later you can act
accordingly.
Then how about 2017? Is
there also something wrong? Gladly, there is not, at least until now. You see,
in 2013, the JCI was down as the economy starts to slow down, mainly due to
falling commodity prices, and down once again in 2015 when the slowdown reached
its peak, when Indonesian economy was almost fell into crisis. Entering 2016,
the economy slowly but surely began to recover, but unfortunately the companies
still did not posted improving performance, so the JCI only rose moderately.
Later in early 2017,
aka today, then whether you realize it or not, but the conditions are almost
all in contrast to the year 2013 and 2015. Take a look: Commodity prices are
rising, Rupiah is stable, economic growth is stable at 5%, trade balance is
surplus, low interest rates, low inflation, low unemployment rate, and so on..
Actually, our economy is currently at such a stable point that when the price
of Pertamax (gas fuel with RON92) increases for only Rp300 (US$ 2 cents) per
liter, it appears to be an extraordinary event! For the future, of course I don’t
know what will happen, but if you look at the massive government spending in
the field of infrastructure development,
as well as the stable price of coal and CPO which is actually the backbone of
the economy, then I am among those who are optimistic that this comfort condition
will last until the end of 2017, and of course it will lead the JCI to move into
a positive zone.
However, the above is
an analysis for the long term. So how about for the short term? What sentiments
that will come later? Well, of course I have no idea about where the JCI will
move in the next one, two, or three months from now on, because I cannot
control which sentiment that will be blown up in the media. But as long as
there are no radical changes in national economy, I believe that this is the right time to put your
investments, then wait for next several months. Based on experince, if you
can corretly select you stocks and buy it at a price that is really low, then
you don’t have to wait for more than one year, but on the hand, you cannot
expect to make profit overnight. So, all you have to do is to buy your selected
stocks, then wait, and I’ll see you later in six to twelve months.
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