JCI has shown a trend of underperformance compared to other key Asia Pacific indices. We believe that this can be attributed to various factors such as economic challenges, political uncertainties, and market sentiment towards Indonesian stocks. JCI declined by c. -2% YTD, while Hang Seng and Shanghai Composite Index gained c. 8% and 4%, respectively.
Asia Pacific Index Comparison
We find it reasonable for Hang Seng Index and Shanghai Composite Index to outperform JCI considering investors may have been reallocating their funds to other indices within the Asia Pacific region, i.e. South Korea and Taiwan, which are perceived to have stronger growth prospects and stability. As a result, JCI continue to experience foreign capital outflow
Foreign Portfolio Investment Flow (USD million)
Nowadays, fundamental analysis has become less relevant when compared to the impact of capital inflow and outflow dynamics driven by escalating geopolitical issues. The increasing influence of geopolitical tensions on global markets has led investors to react more swiftly to news and events that can trigger significant capital movements. In this environment, market participants are placing greater importance on understanding and anticipating the impact of geopolitical developments on capital flows, leading to a shift in focus towards geopolitical risk management strategies.
Foreign outflow has been very sizeable for the past 1 month, with BBRI, BBCA, and TLKM recorded more than IDR8tn, 2tn and 980bn of outflow respectively for the past 20 days, dragging down the shares by -22.3%, -0.5% and -24.1%, respectively. Derived from KSEI ownership data as of the closing on June 3rd 2024, foreign ownership from the free float has decreased with ASII, BBRI and TLKM at a lower level than a year back.
Foreign Ownership Changes (Free Float Only)
1Y | YTD | 1M | |
ASII | -4,66% | -4,44% | -0,62% |
BBCA | -0,44% | 0,16% | -0,35% |
BBNI | 0,92% | -1,33% | -1,02% |
BBRI | -3,77% | -3,35% | -2,42% |
BMRI | 0,91% | 0,20% | -1,21% |
TLKM | -2,21% | -2,17% | -0,54% |
Source: KSEI, Sucor Sekuritas
Judging from the outflow, we see that some of the big caps has shown limited downside from foreign outflow point of view. More importantly, if we take a look at the past few days, some these big cap stocks has shown signs of reversal, gained several percentage points despite the unresolved geopolitics turmoil.
Because of recent steep decline of the share prices, some these big cap stocks are now offering fair if not undemanding valuation. That said, the outlook of the earnings going forward is just as important important as its valuation.
Based on the things elaborated above, we believe it's best to stay defensive amidst the current uncertainties. Hence, we suggest to consider adding more weight to BMRI and TLKM considering its limited downside and better earnings outlook going forward.
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