What are the Best Performing Indonesian Stocks so Far in 2014?
Regarding stock trading on the Indonesia Stock Exchange, investors who focused on property, banking and infrastructure stocks have made the highest profit so far in 2014. Although all sectoral indices that are contained within the benchmark stock index of Indonesia, known as the Jakarta Composite Index (abbreviated IHSG) have shown a good performance, the three aforementioned sectoral indices stand out as the country's top performers. Indonesia's IHSG has risen 16.14 percent between 1 January and 26 May 2014.
The property sectoral index of Indonesia rose 28.15 percent between 1 January and 26 May 2014, followed by the financial sector (+23.62 percent) and infrastructure (+17.99 percent). Apart from robust general economic growth - albeit slowing since 2011 - the property and infrastructure sectors received a boost by the political agendas of the two presidential candidates Joko "Jokowi" Widodo and Prabowo Subianto. Both men target accelerated infrastructure growth, and with improved quality and quantity of infrastructure then investments in property and real estate become more attractive.
Indonesia Stock Exchange:
| Sectoral Index |
YTD (%) |
| Property | 28,15 |
| Financial | 23,62 |
| Infrastructure | 17,99 |
| Consumption | 14,06 |
| Trade | 11,45 |
| Manufacturing | 11,33 |
| Basic Industry | 10,46 |
| Mining | 10,27 |
| Agriculture | 9,49 |
| Miscellaneous | 7,57 |
| IHSG | 16,14 |
2 January - 26 May 2014
Source: Investor Daily
In 2014, net profit of listed property companies is expected to grow further supported by last year's orders. Thus, stocks of property companies will perform well this year. However, demand for property has declined in 2014 (due to higher down payments, higher borrowing costs and the general slowing Indonesian economy). This means that the stock performance of Indonesian property companies may be weaker in 2015. The price to earnings ratio (PER) of property stocks is a bit high at 19 to 23 times due to increased earnings.
Analyst at MNC Securities Reza Nugraha believes that Bumi Serpong Damai, and Ciputra Development are good property stock picks. The former has large land banks, while the latter has shown its "expansive nature".
In recent years, Indonesian banks have been among the most profitable banks in the world. Since 2013, Bank Indonesia has effectively tried to decelerate credit growth which stood at around 20 percent (year-on-year) in order to cool economic growth and safeguard financial stability as high inflation destabilized the economy. Low credit penetration in combination with robust economic growth are the main sources of Indonesian banks' profitability. Profitability is also supported by the large gap (an average of 7 percent) between the rate that banks offer for deposits and the rate that the banks offer for loans. Meanwhile, the non-performing loan (NPL) ratio has remained at a safe level at less than 2 percent at most of the country's large lenders. This year, credit growth is expected at 15 to 17 percent (yoy). The price to earnings ratio (PER) of banking stocks is still attractive at 12 to 13 times.
Regarding stock picks, Nugraha advises Bank Rakyat Indonesia, Bank Mandiri as well as Bank Central Asia because these banks have large assets, high profits and high outstanding credit.