Local stock marts see bullish prospect
Local stock marts see bullish prospect
JAKARTA (JP): Crosby Securities of Hong Kong is very upbeat about the prospects for Indonesia's capital market over the next five years despite the current dip stemming from the Mexican financial crisis.
The company's president, Timothy Beardson, told journalists yesterday that, assuming that Indonesia's economy will grow by between 6.5 percent and seven percent per annum, capitalization on Indonesia's stock exchanges is expected to expand by 50 percent to over US$75 billion within the next five years.
Crosby forecast that growth of the earnings per share among Indonesian listed companies would be about 20 to 25 percent per annum, while the annual profit growth from bonds would be about 15 to 16 percent.
"Inflation will slowly come down in the future, showing less depreciation (of rupiah against the U.S. dollar)... In that scenario, it will be very positive for investors in bond markets, including foreign investors," Beardson said.
The Indonesian government devalued the rupiah against the U.S. dollar in 1986. Since then the government has not devalued the currency again. Instead, it gradually depreciates the rupiah value against the dollar. This year, the governments has set a target of four percent depreciation per annum.
Despite current dramatic slumps in stock values on most emerging markets, Crosby predicts that the Jakarta Stock Exchange index will triple to 1,200 by year 2000.
The Jakarta Stock Exchange Composite Index yesterday rose 5.42 points to 447.29 after taking a steep plunge last week to 12- month low of 441.87. Last week's bearish mood was resulted from worldwide anxiety over Mexico's crisis, which was triggered by its recent move of devaluing the peso by 15 percent against the dollar. The peso has now lost nearly 70 percent of its pre- devaluation value against the greenback.
"It's normal to be up and down in the short term. But in the long run, the trend here is upward," said Beardson, in Jakarta to attend the fifth anniversary of PT Crosby Indonesia, an affiliate of Crosby Securities.
Temporary
Beardson said the downward movement of the stock index would be temporary. As soon as fund managers rediscover Asian emerging markets, including Indonesia, the condition would return to normal, he said.
He explained that most American, Japanese and British investors see the emerging markets as a whole, without differentiating between individual countries; even though they have very different characteristics, especially in work ethics, savings rates, investment rates, currency rates and current account deficits.
Raymond Foo of Crosby Indonesia noted that the economic fundamentals in Indonesia and Mexico are very different. Indonesia's economic growth of over six percent per annum relies on its large savings and investments, while Mexico's growth of less than four percent counts on high domestic consumption demand.
Foo said the Indonesian government's target in private investment, which are expected to account for 80 percent of the country's projected total new investment of Rp 660 trillion (US$300 billion) in the next five years, would drive local stock markets to become bullish in the coming years.
"We expect a higher ratio of market capitalization to gross domestic product, as some $20 billion will be generated from bond and capital markets annually," Foo said. (rid)