Indonesia Stocks Near Correction in Shift to Cheaper Markets


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(Bloomberg) — Indonesian stocks are on track to enter a technical correction on Tuesday as investors looked to cash out from one of Asia’s hottest markets for 2022 in search of cheaper valuations elsewhere.

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The Jakarta Composite Index slid as much as 1.8%, extending declines from a record notched on Sept. 13 to more than 10%. Financial and health-care stocks were among the worst performers on the gauge. 

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The abrupt shift comes just months after the nation’s stock benchmark became Asia’s best performing index when surging commodity prices drew in traders. However, growing concerns about valuations as well as a warmer-than-expected winter, which hurt energy prices, have raised caution among investors in recent weeks. 

Indonesia’s “fundamentals remain strong but other Asian markets might attract buyers due to cheap valuations with higher earnings-per-share growth,” said Andre Benas, head of research at BCA Sekuritas.

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The gauge is currently trading at about 13 times forward earnings, higher than multiples for its peers in South Korea, Taiwan and Hong Kong. 

Asian funds had already started pulling back from the country’s equities while increasing exposure to northern markets like Taiwan and Hong Kong from as early as November, according to HSBC Holdings Plc. In December, foreign investors sold $1.3 billion worth of Indonesian shares, the most since November 2017, according to Bloomberg-compiled data. Foreigners remain net sellers so far this year with outflows of $150 million.

BNP Paribas SA lowered its rating on Southeast Asia’s largest economy to neutral from overweight last month, limiting its picks in the consumer discretionary and coal sectors and adding firms that are part of the electric-vehicle supply chain. By contrast, it upgraded China to overweight from neutral on the possibility of fund reallocations to North Asia, favoring internet, e-commerce and electric-vehicle battery stocks.

Markets like China and Korea are in favor this year as the full reopening of the world’s second largest economy and the bottoming out of the semiconductor industry raised prospects for better domestic earnings. 

Shares in China and Hong Kong are already starting the year on a strong note as market-friendly policies and expectations of an economic revival draw funds away from more expensive markets like India and Indonesia.

—With assistance from Fathiya Dahrul.

(Updates foreign outflows in sixth paragraph and adds last three paragraphs.)


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