Indonesia Construction Stocks Take Lead Before Next Week's Vote
Indonesia Construction Stocks Take Lead Before Next Week's Vote
(Bloomberg) -- Forget investment jitters before Indonesia’s presidential election. There are stocks that could win no matter who becomes the leader.
That’s the view of Jemmy Paul, chief executive officer of PT Sucorinvest Asset Management, who says infrastructure development will continue regardless of the April 17 election result. He has been accumulating construction stocks, some banks, plus PT Telekomunikasi Indonesia and PT Astra International.
The manager of 6.6 trillion rupiah ($466 million) in assets is sticking to his strategy even after President Joko Widodo’s challenger, Prabowo Subianto, told Kompas.com in a report this week that his government will review infrastructure projects and may cancel some of them.
“Even if Prabowo wins the presidency, his administration will have to face reality that this country needs to develop infrastructure massively,” Paul said in an interview Wednesday. “He may cancel some, but at the end of the day he needs to start new projects that will outnumber the ones that he canceled.”
A gauge of construction shares on the Jakarta Stock Exchange Composite Index has climbed more than 7 percent this year, rallying from a two-year slump that erased a 10th of its value. The sub-index hit its highest close since April 2018 on Tuesday and is the best performer among sectors over the past month.
Construction companies also have a growing asset: cash. The top firms in the sector recorded the first positive operating cash flow last year after a two-year dearth. The turnaround happened mostly in the second half, with net cash inflow in the fourth quarter.
Easing pressure on their balance sheets could allow companies to undertake bigger projects going forward, according to Andrey Wijaya, an analyst at PT RHB Sekuritas Indonesia, who initiated coverage on the construction sector with an overweight recommendation last week.
To contact the reporter on this story: Harry Suhartono in Jakarta at hsuhartono@bloomberg.net
To contact the editors responsible for this story: Divya Balji at dbalji1@bloomberg.net, Naoto Hosoda, Kurt Schussler
©2019 Bloomberg L.P.