A gloomy morning, flooded with negative sentiments from the region, turned into a shiny afternoon at Indonesia Stock Exchange (IDX). Dropped around 1% in the morning to tracking peers in the region and all other negative news from China’s slowdown and crisis in Ukraine, the index immediately returned to positive territory seconds after Megawati Soekarnoputri’s announcement declaring Joko Widodo as PDI-P’s president candidate and closed the day with 3.23% gain.
Jokowi saved the day! Nikkei 225 took a tumble 3.3%, while Australia’s All Ordinaries dropped 1.5%. Korea’s KOSPI lost 0.75%, while Hang Seng and Shanghai down 1% and 0.73% respectively. Singapore’s Straits Times Index slipped only 0.25%.
The day had everything to force IDX end in lower ground. China slowdown sent commodities to their new lows. Nymex crude oil stays around US$98 per barrel, while the benchmark May 2014 contracts of crude palm oil (CPO) dropped further by RM27 to RM2872 per ton on Bursa Malaysia Derivatives.
Plantation stocks end mostly lower in the region, but those listed on IDX end mixed, some with substantial gain, including PP London Sumatra and Salim Ivomas. Shares of coal producers also end mostly lower on poor sentiment from the commodity. Jokowi Effect didn’t work for these guys.
Foreign investors poured in huge amount of hot money into the system. Net buy of Indonesian stocks by foreign investors reached Rp7.5 trillion, the biggest single day net buy in years, or probably in history of IDX, lifting further net buy by foreign investors to Rp19.43 trillion, closer to its record last year.
So, who gained?
Well, almost all banking stocks were gainers led by BRI (+10.46%), Mandiri (+9.14%), BCA (+6.75%), and BNI (+6.59%). Astra International (ASII), considered Indonesian bell weather, gained 7.22%, its biggest single day gain so far.
Cement manufacturers gained significantly led by Indocement (+8.11%), Holcim (+7.31%), and then Semen Indonesia (+6%). Toll road operator Jasa Marga advanced 5.45%, while Telkom gained 4.11%. Property stocks also gained significantly, followed by consumers.
Looks like that they’re upbeat with the prospect of Jokowi presidency, expecting him would be a better president to execute policies, including improving the country’s logistic and infrastructure.
Rupiah weakened to Rp11421 per USD from Rp11387 on Thursday, but mainly because market participants have priced in Jokowi Effect in the past few weeks.
Looks like market participants have assumed the presidential race is over and that Jokowi is the next president. Is it?
Well, there are several factors to consider. First, who will be Jokowi’s running mate. Vice president selection is crucial for political stability, balance of power in the country: Islam, military, Java-Outside Java, etc. Second, what competitors would do. Prabowo Subianto, considered a main contender, might have substantially lower approval rating than Jokowi, but if he can establish relationships with other political groups, including Democratic Party, PAN, and probably portion of Golkar, they could pose a serious challenge to Jokowi. Third, possible political ‘tsunami’. Politic is full of surprises. Unnecessary blunder from Jokowi and PDI-P or their potential partners could change the game.
First thing first, let’s see what Jokowi Effect will do to legislative election outcome next month…In the meantime, enjoy your weekend!
DISCLAIMER: NO POSITION IN STOCKS MENTIONED IN THIS ARTICLE