In the field of
journalism, ‘news framing’ is a method used by the media in conveying a news,
information, or facts of a particular event, in order to influence the perception or impression from the
public about the news or the people in it. In other words, news framing is a
method of public opinion making,
where the exact same piece of news, events, or someone’s statements can create
several different perceptions from its readers, depending on how the media/journalist
in delivering the words.
Here’s a simple example
of news framing. One day, a reporter was interviewing a state minister:
Reporter (R): Sir, do
you prefer fried chicken or lamb curry?
Minister (M): Fried
chicken.
R: Smeared with wheat flour
or not?
M: With flour.
R: Like in Kentucky Fried
Chicken (KFC) and McDonald’s?
M: Yes, more or less.
The next day in the
paper came the headline: ‘Minister M preferred American fried chicken and did
not like the traditional Indonesian lamb curry.’
In an online media, news
appeared with the title: ‘Alas! Minister M live a western lifestyle.’
In other online media,
‘Astaghfirullah! Minister M hates lamb meat, a favorite food of Prophet
Muhammad.’
Someone wrote on his
Facebook status, ‘American pig! Minister M is more supportive of KFC and
McDonald’s than local food enterprises.’
News Framing in the
Stock Market
After reading the
example above, you might concluded that news framing usually occurs in
political news, usually related to certain statements from public official
which are then twisted, so it seems
like the official said something, while in fact he did not, or that’s not what
he meant. Actually, if you take a look around, any news related to politics nowadays
can never be separated from this framing technique, and consequently the
opinion that develops in society related to certain political issues always
depends on how the media in delivering a news.
But did you know that
besides attacking particular public figures or officials, the news framing
could also attack particular stocks in the stock market?
Let's look at the
latest examples. Just two days ago, Coordinating Minister Luhut Pandjaitan and
several other ministers told reporters that, with the goal that the light rail
transit (LRT) construction project could be completed on time, the funding
mechanism of the project would be made more flexible. Previously, the project
would fully using the funds from the state budget, but now the Government opens
other funding options such as public service obligation, guarantee, cooperation
with private parties or state-owned enterprises, and so on.
But somehow, the story
that emerges is ‘The construction of LRT, which undertaken by Adhi Karya
(ADHI), could be terminated because it is no longer financed by the state
budget.’
While if we look at the
exact statement from Mr. Luhut, for example as you can read here:
He did not say that the
LRT project is no longer financed by the state budget. He even didn’t ever
stated that the state budget is not able to bear the cost of the project! (its
was the journalist who wrote the sentence). What Mr. Luhut emphasizes is that
since the Government wishes that the LRT project can be completed on time, we
should not rely solely on the state budget, but we can consider many other funding
options including appointing ADHI as an investor (not just as a contractor, but
the owner of the LRT), of course, provided the company is able to provide funds
(but it’s okay if ADHI isn’t able, so the LRT would still belong to the
Government). Notice that Mr. Luhut only said that ‘ADHI can also be the owner
of the project, not only the constructor’, rather than saying ‘We have
appointed ADHI as the project owner, so from now the company is fully
responsible to the issue of LRT financing.’ Notice also that he did not say
words like ‘The constuction should be stopped', 'we do not have enough money’,
or something like that. Instead he stressed that ‘We wish that the LRT project
could be completed on time in the first quarter 2019, and it seems likely.’
Nevertheless, the news that
spreaded is that the LRT project undertaken by ADHI was in a danger of
termination. And as you can guess: In just two days, the share price of ADHI dropped
to below psychological level of Rp2,000
per share, and of course, everybody panicked.
But this story of ADHI
is not the first. A few months ago, when Jasa Marga
(JSMR) shares plummeted to below 4,000, there were some news which said that
because the company will operate many new toll roads in the near future, JSMR
may lose money as the new toll roads would cost the company heavily for its operations
(these words are absolutely absurd, nevertheless people believe it). In
December 2016, there was also news that because of the policy of tax amnesty,
the banks in the country will be flooded by repatriation funds from abroad,
that if later the bank can not distribute it immediately in form of credit, they
will suffer losses (the shares of big banks like BBRI et al dropped). There has
also been news that ‘In order to discourage people in smoking, the government
will raise the excise tax of cigarettes, so the price of cigarettes may raise from
Rp20,000 (US$ 1.3) to Rp100,000 (US$ 8) per pack’, whereas it was only a
discourse from an NGO! But the news is strong enough to drag down the stock of
the largest cigarette manufacturer, Gudang Garam (GGRM). And so on.
 |
| Jasa Marga (JSMR) is one of the best companies in the IDX in terms of fundamentals, but it doesn't mean that the stock cannot fall sometimes |
In addition to making
particular stocks to fall, news framing could also making particular stocks to
rise. When Bank Pundi was acquired by the Provincial Government of Banten, and changed its name to Bank Banten (BEKS), there
are news everywhere saying that BEKS fundamentals would become as good as Bank
Jabar (BJBR) bla bla bla, thus the stock skyrocketed (but later dropped back).
In other time, when Donald Trump won the US Presidential Election, suddenly
popped the news which reminds the public that months before, Trump had worked
together with Hary Tanoesoedibjo to build a resort in Bali, and later that day
the stock of MNC Investama (BHIT), which was Hary Tanoe’s holding company,
jumped to the sky.
Nevertheless, either
the news causes the stocks to rise or fall, but as you can see: Shortly after
the news is forgotten, usually no later than several weeks, the stock price will return to its previous
position. Even in the case of news framing with prolonged effects, for
example when the issue about limitation
of banking’ net interest margin became hot news in February 2016, which
causes the banking stocks to fall, and the price did not recovered for more
than six months later, but look at the share price of BBRI, BBNI, BMRI, and
BBCA today, surprised??
In conclusion, when we
find a fundamentally good stock that is being attacked by a certain negative
news, then it probably an opportunity. But if it was our stocks in our portfolio
that being attacked, then whether this situation could lead to profits or losses,
it depends entirely from the way we deal with the attack: If you act like ‘political
commentator’ on Facebook who always read the news headline without even reading
the content of the news itself (while the news could be hoaxes) then became
triggered because of it, then of course: You would be panic as soon as your
stock is under attack, so you sell it, only to regret it a few moments later
because the stock was rising again.
But if we only buy good
quality stocks in the first place, and taking the time to read the news thoroughly
to understand the essence of the story,
and later you find out that there is nothing to worry about, then of course you
don’t have to suffer any losses. Actually no matter how good the fundamentals
of the stock that you own, still it might dropped anytime if it was ‘under
attack’ by these news framings, and that’s one of many inevitable risks in
stock investing. Anyway, now you know how to deal with it.
Original article was written and published (in
Indonesian Language) in February 9, 2017. Any inquiries, contact the author
(Teguh Hidayat) by email teguh.idx@gmail.com.
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