Capital Markets
From The Report: Indonesia 2014
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Growth in Indonesia’s stock market in recent years has been driven by the steady expansion in the total number of shares listed, which increased from 296 in 2008 to 479 by September 2013. Once dominated by commodities, such as mining, energy and agriculture stocks, the local market is now led by consumer-related shares, such as financial services, infrastructure and utilities. Domestic investors’ share of trading has steadily grown in recent years, climbing from 19% in mid-2007 to 44.2% by August 2013. Encouraging new supply is critical to the bourse’s ambitions of becoming the region’s largest exchange by capitalisation by 2015, when it hopes to reach $750bn. The number of IPOs nearly doubled from 13 in 2009 to 25 in 2012, raising a total of $1bn. Despite the challenges that have been caused by global volatility, most investors have maintained a bullish long-term outlook. Indonesia’s reliance on foreign portfolio investments to finance its current account deficit is a cause for concern. All the same, its consistent growth record, resilient corporate earnings and dynamic private sector highlight its strong prospects for expansion going forward.
This chapter contains interviews with Muliaman D Hadad, Chairman, Otoritas Jasa Keuangan; and Eko Yuliantoro, CEO, Bahana Securities.

Articles from this Chapter

Overview

Eye on the long term: While the markets are vulnerable to shifts in global risk appetite, the fundamentals supporting growth remain strong
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Over the past decade, Indonesia’s capital markets have gone from strength to strength, buoyed by the commodities super-cycle, sustained economic growth and a resilient domestic consumption story. Long dominated by foreign institutional investment, they remain vulnerable to shifts in global emerging market risk appetite. “We are still in the structural bull market that started in 2003,” Erwan Teguh, CIMB Securities’ head of research, told OBG. “Despite externally induced corrections in 2008,…

Interview

Muliaman Dharmansyah Hadad, Chairman, Otoritas Jasa Keuangan (OJK): Interview
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Interview:Muliaman Dharmansyah Hadad How much progress has been made in terms of easing cross-border restrictions within the ASEAN banking integration framework? MULIAMAN DHARMANSYAH HADAD: I think we’re already quite advanced in this regard. It’s a long process, and we’re still discussing the details of how we’ll proceed with this, but a lot of players would like to see a mutually beneficial integration so that, at the end of the day, there are not losers and winners. We’ve learned…

Interview

Eko Yuliantoro, CEO, Bahana Securities: Interview
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Interview:Eko Yuliantoro How are Indonesian capital markets bracing for the tapering of the US’s quantitative easing programme, and what is your 2014 outlook? EKO YULIANTORO: With regard to the Federal Reserve’s tapering, I believe that most of the bad news has mostly been priced into the market, in line with 2013’s Rp25trn ($2.5bn) net foreign outflow in the Indonesian equity market. Additionally, based on our analysts’ recent road shows in Singapore, Hong Kong and Japan, most foreign…

Analysis

A growing appetite: Re-ratings and demand for high-yielding bonds are drawing investors to the fixed-income market
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Although Indonesia’s fixed-income market was only valued at around 15% of GDP in 2012, compared to 45% for equities, issuance and investor appetite have grown. The government has sought to rebalance its debt profile towards domestic sources, and the value of outstanding local-currency government bonds has doubled from $41.2bn to $84.9bn in the eight years to August 2013, according to the Indonesian Stock Exchange (IDX). While still marginal as a share of total issuance, outstanding corporate paper…

Analysis

Hedging your bets: Regulatory changes are set to support the growth of exchange-based derivatives trading
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Despite the widespread use of hedging instruments offshore, Indonesia’s derivatives market has been slow to develop. Bank Indonesia (BI) regulations in late 2008 following significant losses linked to onshore structured products have restricted foreign-exchange (FX) and interest-rate derivatives to over-the-counter (OTC) trading between banks. A new exchange established in 2009, the Indonesia Commodity and Derivatives Exchange (ICDX) introduced commodity and limited FX futures that will benefit…

Analysis

Commodities exchange: A ban on unprocessed ore exports should drive demand for onshore contracts
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While attempts since 1999 to establish a dynamic commodity futures market have faced low liquidity and patchy trading, the single most significant stimulus has come from new government restrictions on the export of unprocessed mineral ores since 2013. The Trade Ministry, which oversees the Commodity Futures Trading Regulatory Agency (BAPPEBTI), has sought to build Indonesia’s commodity spot-trading capacity to support a ban on tin traded offshore. Although a full ban on exports of unprocessed ores…

Analysis

Austindo Nusantara Jaya: Agriculture
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The Company Austindo Nusantara Jaya (ANJT), established under the name Austindo Teguhjaya in 1993, engaged in financial services, health care, agrobusiness and energy prior to 2012. In that year, ANJT restructured its business to focus on palm oil and sago, as well as engage in power generation from geothermal and bio-gas. Growth in palm oil (93% of revenue), sago, tobacco (3%) and renewable energies (4%) will be supported using IPO proceeds amounting to $41m. Owned by the Tahija family, who are well known for shareholder-friendly histories with listed Bank Niaga and Pearl Energy, ANJT has solid corporate governance and no related-party…

Analysis

BJBR: Banking
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The Company Established in 1961, Bank Pembangunan Daerah Jabar Banten (BJBR) was the first district development bank, known as Bank Karja Pembangunan Daerah Djawa Barat. In 1992, the bank changed its legal status to become a foreign exchange commercial bank, with limited scope for operations in the East Java and Banten regions. Following its IPO of 2.4bn new shares, which raised approximately Rp1.5trn ($150m) in July 2010, BJBR is currently owned by several local governments: the West Java provincial government (with a 38% stake), Java regency government (18%), Banten regency (6%), Java city government (6%), Banten provincial government (5%)…

Analysis

Garuda Indonesia: Transport
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The Company Established over 60 years ago, Garuda Indonesia (GIAA) is the country’s first carrier and the only premium airline serving the local market, with an extensive network including 22% of domestic market share and 38% market share in cargo. On the international front, GIAA is also a market leader with a market share of 15.5% for departing flights. GIAA was in charge of operations for 131 aircrafts as of the end of September 2013. GIAA has an integrated business with four subsidiaries: Aero Wisata (travel, transportation and catering), GMF Aero Asia (maintenance), Gapura Angkasa (ground handling), Abacus Distribution systems (computer…

Analysis

Malindo Feedmill: Poultry
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The Company Established in 1997, Malindo Feedmill (MAIN), which is involved in the production and distribution of poultry feed, has become a rising star within the growing poultry sector due to a low penetration rate. MAIN was formerly known as Gymtech Feedmill Indonesia, a subsidiary of two listed Malaysian companies, Leong Hup Holdings Berhad and Emivest Berhad. In 2000, MAIN acquired a feed mill processing plant with an installed capacity of 150m tonnes per annum (tpa) from Subur Group and changed its name to Malindo Feedmill. To add production capacity, MAIN continued to acquire more facilities and eventually gained sufficient size to list…

Analysis

Sri Rejeki Isman: Textiles
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The Company Indonesia’s largest integrated textiles manufacturer, Sri Rejeki Isman (SRIL), popularly known as “Sritex”, is currently enjoying the benefit of demand displacement from China as companies relocate to South-east Asia due to cheaper labour costs. The upstream segment of spinning and weaving operated by SRIL is more capital-intensive compared to the company’s downstream segment (printing and garments), which has the propensity to be more labour-intensive. SRIL is predominantly an export-based company (around 60% of its revenues are to the overseas markets) with South Korea, China and the US as the company’s largest export…

Analysis

Total Bangun Persada: Construction
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The Company Total Bangun Persada (TOTL), one of two listed construction companies not owned by the state, focuses on high-rise buildings for residential, office and commercial projects. Established in 1970, the company was listed on the IDX in July 2006, before being included in the MSCI Indonesia Index in May 2013. TOTL has built some prestigious buildings in Indonesia, including Bank Mega Tower, Trans TV, The Regatta Apartment and The Pakubuwono Residences. As of September 2013, the company’s revenues mainly stemmed from projects in Java and Bali (76%), followed by undertakings in Kalimantan and Sumatra (10% and 9%, respectively), with high-rise…