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New Kids on the Block

In the aftermath of the recent MSCI index release, the Indonesian equity scene has undergone a notable transformation.


Noteworthy stocks like AMMN, now feature on the global standard list, while INCO has exited, totaling 22 companies representing almost 80% of the domestic freefloat market.


Following AMMN, stocks like ARTO and EMTK have entered the MSCI small-cap index. Conversely, BBYB, BUMI, PTPP, TINS, and WIKA are no longer part of the index. This change suggests a shift for investors to reassess their strategies based on these alterations in the MSCI index composition.


Source: MSCI, Sucor Sekuritas


We also can find the current MSCI index country weights, which countries with a higher total market value of their publicly traded stocks will have a greater weight in the MSCI index, and currently, Indonesia contributes 2%.


Source: MSCI, Sucor Sekuritas


As a compass for global institutional investors and hedge funds in shaping investment strategies, investors will certainly pay close attention to the performance of the MSCI index.


A detailed analysis of the MSCI Indonesia index over the past 15 years, in comparison to the MSCI Emerging Market and MSCI ACWI IMI, reveals a noteworthy accomplishment, with returns surpassing both indexes.


Source: MSCI


While the MSCI index has weathered challenges, facing negative returns in notable years like the Economic Crisis in 2013 and 2015, as well as the COVID-19 pandemic in 2018, recent times tell a different story.


MSCI Indonesia has displayed more stability when compared to other major Asian players like China and India.


Source: MSCI, Sucor Sekuritas


Beyond the annual performance mentioned earlier, the table below unveils current market capitalization and forward PE ratios of MSCI Indonesia. This provides a comparative lens, including key markets like China, India, Taiwan, and South Korea.


Source: MSCI, CEIC, Sucor Sekuritas


However, as we reflect on our local market conditions, it becomes apparent that Indonesia faces considerable challenges, lagging behind in market cap, the number of listed companies, inclusion in the MSCI index, and MSCI weighting.


Despite these hurdles, a revealing comparison of forward PE ratios indicates that Indonesia is currently undervalued when compared to other markets like India and Taiwan.


This situation could present an attractive opportunity for those looking to invest, as it suggests the potential for higher returns compared to the current valuation.


However, it's crucial for investors to always consider broader market dynamics before making investment decisions.


As we venture forward, let's stay agile and maintain a keen focus, ensuring we don't miss out on the opportunities that lie ahead!

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