Jakarta Globe | Insight

Business as Usual for Capital Markets

Presiden Joko Widodo meninggalkan Gedung Bursa Efek Indonesia usai menutup perdagangan saham di Jakarta, Jumat (29/12). Indeks Harga Saham Gabungan (IHSG) pada perdagangan terakhir tahun 2017 ditutup naik 41,6 poin atau sekitar 0,66 persen ke level 6.355,65 yang merupakan level tertinggi baru sepanjang masa BEI berdiri. ANTARA FOTO/Puspa Perwitasari/foc/17.

Refleksi pergerakan Indeks Harga Saham Gabungan (IHSG) di Bursa Efek Indonesia, Jakarta, Jumat (22/12). Menjelang libur Natal 2017 dan Tahun Baru 2018, IHSG mencatat rekor baru yaitu ke posisi 6.221,01 naik 37,52 poin atau 0,61 persen. ANTARA FOTO/Puspa Perwitasari/ama/17

Jakarta. The local bourse has set a target of listing 35 new companies this year, on the back of improving economic growth and upcoming regional elections that are expected to boost consumption in the country.

“We expect [the total number of companies to go public this year] to exceed our target of 35,” Indonesia Stock Exchange (IDX) president director Tito Sulistio said on Dec. 28. He added that several subsidiaries of state-owned companies are expected to go public this year.

Tito said there are several challenges this year in the domestic market, including hype surrounding the biennial multi-sport event Southeast Asian Games, regional elections and the International Monetary Fund and World Bank meeting in Bali.

“The country’s political events this year will not impede activity in the capital market. I can assure you it will remain stable,” Tito said.

He also expressed hope that average daily transactions can reach about Rp 9 trillion ($671 million), which will be 16 percent higher compared with last year’s target of Rp 7.75 trillion. The higher targets slated for this year are largely based on a positive outlook for increased growth as well as credit rating upgrades by Standard & Poor’s, Fitch Ratings and Moody’s.

Meanwhile, IDX listing director Samsul Hidayat said communication construction service LCK Kedaton, solar panel manufacturer Sky Energy Indonesia, coal producer Borneo Olah Sarana Sukses and local shariah lender BTPN Syariah are expected to go public in the first quarter this year.

Samsul said another startup company focused on the internet of things (IoT) will also undertake an IPO in 2018.

Silvano Rumantir, president director at state-owned brokerage firm Mandiri Sekuritas, said that an additional three private companies, involved in building materials, health care and the food and beverage sectors, are expected to undertake initial public offerings this year.

“Other than that, we have yet to receive any proposal to handle IPOs for subsidiaries of state-controlled firms for this year,” Silvano said. He added that the proceeds from each of the companies’ IPO is expected to reach Rp 1 trillion.

Aloysius Kiik Ro, restructuring and business development deputy at the Ministry of State-Owned Enterprises, previously said about 10 subsidiaries of state-owned companies would go public this year, including Wika Realty, the property unit of state-controlled construction firm Wijaya Karya (Wika).

The bourse has continued to implement various programs to increase the number of investors in the market by setting up representative offices in 34 provinces and 400 stock investment galleries at universities across the archipelago.

Boon for Fundraising

The IDX targets total fund collection at the exchange this year to reach around Rp 1,000 trillion, compared to last year’s Rp 802 trillion in funds collected.

The local bourse expects a myriad of corporate actions to raise capital this year, including IPOs (Rp 9.6 trillion), rights issuance (Rp 72.3 trillion), warrant sales (Rp 1.3 trillion), corporate and Islamic bonds (Rp 154.9 trillion) and government bonds (Rp 564.6 trillion).

Fakhri Hilmi, head of the capital market monitoring department at the Financial Services Authority (OJK), said that this year fundraising prospects are projected to be favorable to investors, in which bonds will dominate corporate actions and contribute about 60 percent to 63 percent from total capital market fundraising.

He also expects many more diversification instruments in the capital market this year, following the issuance of Rp 4 trillion rupiah-denominated global bonds, known as Komodo bonds, issued by the state-controlled toll operator that became listed on the London Stock Exchange on Dec. 18.

Meanwhile, Indonesia Power, a subsidiary of state-owned electricity company PLN, issued asset-backed collective investment contracts, or KIK-EBA, in September last year. Fakhri also said that OJK also issued regulations for green and municipal bonds.

A rating director at local credit rating agency Pefindo Salyadi Saputra said that so far this year, the agency has mandated a small number of corporate bonds worth a total Rp 40.9 trillion. He said that corporate debt issuances could potentially reach a total of Rp 158 trillion from 115 companies in 2018.

Confident Investors

Asset managers saw a strong upward trend in consumer goods and telecommunications and financial companies last year. In 2018, an election year, purchasing power is projected to increase and boost the net incomes of companies like Indofood CBP Sukses Makmur and Telekomunikasi Indonesia.

“Investors do not need to worry as historically, each election year, the economy typically remains stable,” said Katarina Setiawan, chief economist and investment strategist at Manulife Aset Manajemen Indonesia.

Bank stocks will benefit as the specter of bad loans from the past two years has diminished and loan growth is set to increase with an economic pick up.

William Surya, an analyst at local brokerage firm Indosurya Sekuritas, said the market will remain attractive this year due to broad financial market liquidity.

Investors may need to watch out for external factors though, like rising geopolitical tensions and rate increases by the US Federal Reserve, as they could trigger an outflow from emerging markets into developed economies.

The number of growing domestic investors is high enough to sustain the Jakarta Composite Index if foreign investors decide to exit the market this year.

Binaartha Sekuritas analyst Nafan Aji said that as the government targets a higher economic growth of 5.2 percent to 5.4 percent, the country’s index may rise.

Coal prices are also expected to improve on the back of growing demand from India, South Korea and the Philippines, which will benefit miners such as Adaro Energy and heavy machinery distributor United Tractors.

Nafan said there are a few numbers of companies that have expressed interest in going public this year, leading investors to anticipate huge offerings from subsidiaries of state-controlled companies.

“The capital market outlook this year is superb,” Nafan said.