Jakarta, CNBC Indonesia – The flow of foreign funds has continued to flood the country’s stock market since the beginning of the year, as the Composite Stock Price Index (JCI) continues to break new record highs.
This seems to indicate that foreigners are not so focused on global negative sentiment so far, starting from the plan to increase interest rates by the United States (US) central bank, the Federal Reserve (The Fed), to the heating up of Russia’s invasion of Ukraine.
According to data from the Indonesia Stock Exchange (IDX), on Tuesday (1/3/2022), JCI ended up 0.48%% at 6,921.44 which was the highest closing level in history (all time high/ATH).
Since the beginning of this year, the JCI has recorded a dozen times that it has successfully penetrated the highest closing level of all time. Over the past month alone, the national stock benchmark index has succeeded in breaking new record highs 16 times.
As a result, since the beginning of the year or year to date (ytd), the JCI has strengthened 5.17%.
Practically, the JCI became the brightest benchmark stock index this year in the ASEAN region, and even Asia-Pacific, beating Singapore’s Strait Times index in second place which has risen 4.61% ytd.
As the JCI soared, foreign funds continued to flow into the domestic market.
Yesterday, foreigners recorded a net buy of Rp 1.28 trillion in the regular market and Rp 421.28 billion in the negotiating market and cash market.
Since the beginning of the year (ytd), foreigners have recorded a net buy of IDR 25.16 trillion in the regular market.
In fact, when the JCI plunged 1.5%–along with the ‘burning’ of the global stock market–on Thursday last week (24/2) following the news that Russia invaded Ukraine, foreigners continued to buy Indonesian issuers’ shares with a value of Rp. 821 billion in the regular market and IDR 881 billion in negotiable & cash market.
Positive Catalyst for Foreign Entry
Although the negative sentiments above, ranging from the planned increase in the Fed’s interest rates to the heating up of the situation in Ukraine due to the Russian attack, to a certain extent also influenced the movement of the JCI and the Indonesian economy in general, there were a number of positive catalysts that helped encourage foreigners to enter the Indonesian stock exchange. .
First, regarding Indonesia’s economic outlook which is expected to improve after being affected by the Covid-19 crisis since 2020.
The government’s projection in the 2022 State Revenue and Expenditure Budget (APBN) assumes economic growth of 5.2%. Meanwhile, Bank Indonesia (BI) estimates that the country’s GDP this year will grow in the range of 4.7-5.5% with a midpoint of 5.1%.
Meanwhile, Faisal Rachman, an economist at Bank Mandiri, estimates that the Indonesian economy in 2022 will grow 5.17%. Economic growth will be supported by household consumption and stronger investment in line with the easing of the Implementation of Restrictions on Community Activities (PPKM).
“But that doesn’t mean there are no risks. The normalization of world monetary policy and uncertainty regarding the Covid-19 pandemic, especially with the presence of a new variant, are the biggest risks,” Faisal said in his research, quoted by CNBC Indonesia (5/2/2022).
Meanwhile, for the whole of 2022, market consensus predicts Indonesia’s economic growth with a projected median value of 5%, higher than last year’s economic growth.
Just so you know, the Indonesian economy as measured by Gross Domestic Product (GDP) will grow 3.69% in 2021. This figure is improving compared to 2020 which is -2.07%.
Second, related to the first point, analysts view that the valuation of Indonesian shares is still attractive.
MNC Sekuritas economist Tirta Citradi explained, “This [masuknya dana asing ke bursa saham RI] shows that confidence [kepercayaan diri] Foreigners towards Indonesia are still good,” he said when contacted by CNBC Indonesia, Monday (28/2).
Tirta also added that one of the triggers why foreigners want to buy up domestic stocks is because of the attractive valuation issue and Indonesia’s economic outlook which is still solid this year.
“We have to see, let’s just use the US as a proxy, in 2021 the price of US shares has gone up fast. The valuation is at a premium, different from Indonesia. Even though it gives a 10% return in 2021, the valuation is still okay and fair,” he continued.
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