Jakarta, CNBC Indonesia – In the midst of the heating up of the Russo-Ukrainian war, apart from buying up gold, investors are also registered to enter stocks, especially commodity stocks. In fact, when sentiment worsens, generally, risky assets will be avoided.
Regarding gold, the yellow metal has long been known as a safe haven that offers hedging. for investors from uncertain economic conditions or crises. This is because gold has a stable price movement and minimal risk.
On Friday (4/3/2022), the world gold price on the spot market closed at US$ 1,968.45/troy ounce, up 1.72% compared to the previous day as well as being the highest since early September 2020.
Gold prices are still undergoing a positive trend. Throughout this week, gold prices posted an increase of 4.37% on an annual basis point-to-point.
In the last month, the price skyrocketed 8.8%. Meanwhile, since the beginning of the year (ytd), the price of gold rose 7.66%.
According to Goldman Sachs, a number of commodity prices are expected to continue the upward trend amid the West continuing to impose sanctions on Russia for its military action against Ukraine. Goldman said it had to do with supply disruptions and the prospect of future inflation – and stagflation – thanks to Russia’s war in Ukraine.
Goldman predicts, gold is a safe-haven commodity that will experience a much larger rally in the future.
“The recent escalation with Russia creates a clear risk of stagflation for the broader economy, driven by higher energy prices, which reinforces our belief in higher gold prices in the coming months and a target price of $2,150/toz ( troy ounce),” said Goldman, quoted by Kitco (28/2).
Goldman explained that gold will play a central role in this conflict as Russia turns to the precious metal as leverage amid sanctions. Russia’s gold reserves total 2,298.53 tonnes, according to the World Gold Council.
“Gold’s unique role as a currency of last resort is likely to be seen if the restrictions on Russia’s central bank accessing foreign reserves make it possible” [Rusia] leveraged its large domestic gold stock to continue foreign trade, most likely with China,” the bank said.
Indeed, historically, history recorded several events that caused a spike in world gold prices due to war.
According to search Previous CNBC Indonesia Research Teamduring World War I, the world gold price reached US$ 536.69/troy ounce in April 1915. After the war subsided, the gold price fell and reached its lowest price at US$ 275.2/troy ounce.
50 years later, the world gold price skyrocketed by 290% since December 1970 to reach its highest level in March 1974. At that time, the peak price of gold was at US$ 999.67/troy ounce. Asset safe haven This skyrocketed because of the Middle East war that broke out in 1973.
Meanwhile, in the 2000s, tensions between the United States (US) and Iraq made gold prices soar up to 50% within a year.
Flood of Foreign Funds, JCI Sets a Record
As mentioned a little above, Russia’s war in Ukraine did not dampen investors’ risk appetite for buying up stocks. The closest phenomenon occurred in the Indonesian stock exchange.
According to data from the Indonesia Stock Exchange (IDX), the Jakarta Composite Index (JCI) closed at an all-time high (ATH) at 6,928.33 on Friday (4/3). Since the beginning of this year, the JCI has several times broken all-time highs.
Practically, currently, the JCI has become the benchmark stock index with the strongest performance in the ASEAN region, even Asia-Pacific, with an increase of 5.27% since the beginning of the year (ytd). JCI outperformed Singapore’s Straits Times index which rose 3.30% ytd.
Foreign funds are constantly flowing into the country’s stock exchange. On Friday (4/3), foreign investors made a net buy with a jumbo value of IDR 1.90 trillion in the regular market and IDR 491.73 billion in the negotiated and cash market.
On a year to date (ytd) basis, foreigners have entered the Indonesian stock exchange with a net purchase value of IDR 27.57 trillion in the regular market.
In fact, when the JCI plunged 1.5%–along with the ‘burning’ of global stock markets–on Thursday (24/2) following news of Russia’s invasion of Ukraine, foreigners continued to buy up shares of Indonesian issuers with a value of Rp. 821 billion in the regular market and Rp. 881 billion. billion in negotiable & cash market.
Meanwhile, the stocks that were bought up by foreigners on a yearly basis were dominated by big cap stocks (jumbo market capitalization) of banks.
The shares of a state-owned bank, PT Bank Rakyat Indonesia Tbk (BBRI), for example, have been bought up by foreigners with a net purchase value of Rp 4.9 trillion ytd. Its share price also shot up 13.63%.
Another example is the issuer of the Djarum Group bank, PT Bank Central Asia Tbk (BBCA), which recorded a net buy of Rp 3.8 trillion ytd. At the same time, BBCA’s share price skyrocketed 8.22%.
Just so you know, the two stocks are the rulers on the stock exchange with each market capitalization of IDR 707.78 trillion (BBRI) and IDR 973.87 trillion (BBCA).
Apart from macroeconomic conditions which are expected to continue the recovery, stock valuations in Indonesia are still attractive, analyst said that the solid performance of snapper banking throughout 2021 also made investors, including foreigners, expect a jumbo dividend distribution.
Take for example, BBRI has just announced that it will distribute dividends for the 2021 fiscal year of 85% of net profit or to be precise Rp. 26.4 trillion which will be distributed to shareholders.
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