Shares of listed firms to grow by 21 percent
Shares of listed firms to grow by 21 percent
JAKARTA (JP): Market research conducted by Kleinwort Benson Ltd. predicted that the earnings per share (EPS) of public companies listed on the Jakarta Stock Exchange (JSX) are to grow by 21 percent this year, down from an estimated 35 percent last year.
The estimated EPS for Indonesian companies is below Taiwan's, which is predicted to remain at 25 percent, while in some other Asian countries EPS growth might even decline into a range of 12 to 20 percent.
Director of Kleinwort Benson Alistair Scott said last week that with the earnings growth slowing down, the average price earning ratio for stocks listed on the JSX will average out at 17.2 times, as compared to 24 times last year.
The research also predicted that the JSX Composite Index would close at a level between 580 and 600 point this year. The index hit 570 points yesterday.
An analyst from a local brokerage firm agreed there would be a decline in EPS growth, but disagreed with the predicted decline of the price earning ratio.
The analyst told The Jakarta Post yesterday that the main reason for the slow down in the growth of earnings is the curbing of credit expansion, which means that it will be difficult for most companies to get funds for their production expansion.
"However, I don't think that the price earning ratio will also decline. It could be true if we assumed that the share prices will be constant at last year's levels. I think the prices of bluechip stocks will grow further so the price earning ratio will also increase," he contended.
The analyst also predicted that the JSX Composite Index will hit 600 points in the first quarter.
A director of PT Asian Development Securities, Ikada, told the Post that much money from the United States was still flowing into Indonesia despite tighter competition for funds from other Asian countries.
"Although there is still a chance for price increases in the U.S. market, quite a large portion of the idle funds of American investors will go overseas, particularly to Asia, because those investors need to diversify their investments," Ikada said.
Moreover, they have to go somewhere after booking big gains last year, Ikada said.
Ikada estimated that consumer goods and retail stocks as well as some big-share stocks in each sector will become the major targets of American investors.
Scott noted that international investors were actually cautious about the Indonesian economy following some bad news on the trade balance and current account deficit, and also the property assets bubble earlier this year.
However, he said that there are some key factors which will work to Indonesia's benefit among international investors, such as political stability, a solid history of economic growth, liberalization which has spurred industrialization, and a strong resource base.(08)