Foreign Funds Erase Inflow Into Indonesia Stocks This Year; Philippine Stocks Enter Bear Market as Foreign Outflows Surge

Foreign Funds Erase Inflow Into Indonesia Stocks This Year

Foreign fund flows into Indonesian equities turned negative for the first time this year after investors pulled money from the stock market for a 22nd day.

Foreigners sold a net $68 million worth of Indonesian stocks yesterday, according to data compiled by Bloomberg, taking total outflows this year to $20 million. The Jakarta (JCI) Composite Index fell for a fifth day, dropping 0.2 percent to 4,418.872, its lowest close since Jan. 28.The Jakarta gauge has slumped 15 percent since reaching a record on May 20. The nation’s stocks have mirrored declines in other emerging markets after Federal Reserve Chairman Ben S. Bernanke said on May 22 the U.S. central bank could consider paring stimulus. The MSCI Emerging Markets Index has plunged 15 percent since Bernanke’s statement.

“It is a clear sign that foreign investors are underweighting Southeast Asian stocks, including Indonesia,” John Teja, a director at Ciptadana Securities in Jakarta, said by phone. “The outflow will continue and the index will remain under pressure. I think an index level of 4,200 would be a good point to re-enter the market,” he added, referring to the Jakarta index.

PT Astra International, the largest company in the index by market capitalization, fell 2.4 percent, the biggest drag on the benchmark gauge. PT Telekomunikasi Indonesia, the country’s largest telecom company, slipped 2.5 percent, while PT Bank Central Asia sank 1.7 percent.

Valuation Drop

The Jakarta index trades at 12.9 times projected 12-month earnings, the cheapest since Aug. 30, data compiled by Bloomberg show. That compares with a peak of 15.9 times on May 20. The MSCI Emerging Markets Index trades at 9.2 times, a one-year low.

PT Jamsostek, the country’s biggest pension fund, expects the benchmark index to extend losses before stabilizing at 12 times to 13 times forecast earnings, its President Director Elvyn Masassya said in an interview on June 17.

PT Nomura Indonesia is recommending investors add positions in Indonesian stocks as structural reforms gain momentum and earnings growth will remain strong, Wilianto Ie, head of research, wrote in a report today.

“We are turning bullish again on Indonesia equity.” Ie wrote. “The correction in the JCI is near the tail-end as foreign investors have sold nearly a quarter of their positions bought since 2010, based on our calculations.”

Ie said currency risk remains investors’ top concern given the strong dollar and high historical volatility in the rupiah. The currency has weakened 3.1 percent this year, and traded at 9,943 per dollar at 11:41 a.m. local time, prices from local banks compiled by Bloomberg show. The currency reached 9,958 on June 18, the weakest level since September 2009.

To contact the reporter on this story: Harry Suhartono in Jakarta at hsuhartono@bloomberg.net

Philippine Stocks Enter Bear Market as Foreign Outflows Surge

Philippine stocks entered a bear market as the nation’s benchmark equity index slumped for a fifth day amid the biggest monthly foreign sell-off on record.

The Philippine Stock Exchange Index (PCOMP) tumbled 3.1 percent to 5,789.06 in Manila, the lowest close since Dec. 19. The gauge has lost 22 percent from a record 7,392.20 set on May 15, wiping about $62 billion in value from the nation’s stocks as of yesterday’s close. Valuations dropped to a seven-month low and volatility climbed to the highest in more than four years. Overseas funds sold a net $344 million of Philippine stocks this month through yesterday, heading for the biggest monthly outflow since Bloomberg began compiling the data in 1999.

Philippine stocks have slumped from a record, wiping as overseas investors sold the nation’s equities after U.S. Federal Reserve Chairman Ben S. Bernanke said on May 22 the central bank could consider paring stimulus if the country’s employment market showed sustainable improvement. Bernanke said on June 19 the Fed may start reducing bond purchases this year and end the program in 2014 should risks to the U.S. economy abate.

“The slump was caused by expectations the U.S. will taper monetary stimulus and not by a deterioration in the Philippine economic and corporate outlook,” Jerome Gonzalez, who helps manage $230 million at Philequity Management Inc., said by phone today. “This has opened a good window to come in and start buying in tranches. Our fundamentals remain intact.”

Volatility Spike

The benchmark index is trading at 16.1 times projected 12-month earnings, the cheapest since Nov. 23, from a record 20.8 times on May 15. That compares with MSCI Emerging Markets Index’s 9.2 times. The Philippine gauge’s 30-day volatility climbed to 38.5, the highest since January 2009.

Ayala Corp. (AC), owner of the nation’s largest builder and biggest bank by market value, tumbled 9.2 percent, the steepest loss since Oct. 27, 2008. It was the biggest contributor to the index’s decline today.

Belle Corp. (BEL), which is building a Manila casino with Melco Crown Entertainment Ltd., plunged 12 percent, the sharpest loss since Feb. 28, 2007. Aboitiz Equity Ventures Inc. (AEV), which has investments in power and banks, sank 5.9 percent to the lowest close since Dec. 28, 2011.

The peso rose 0.9 percent to the dollar, paring this month’s loss to 2.8 percent, the worst performance in Asia after the Indian rupee and Malaysian ringgit. The yield on 8 percent government bonds due July 2031 fell 50 basis points to 5.25 percent, according to Tradition Financial Services prices as of 4:06 p.m. The rate rose 5 basis points earlier.

“It’s not a question of valuations anymore,” Rico Gomez, who helps manage $2.8 billion at Rizal Commercial Banking Corp., said. “It’s a matter of the level of risk that investors are willing to take.”

Six of the 30-stocks in the nation’s equities benchmark index are trading at a 52-week low, the most since September 2011, according to data compiled by Bloomberg. The 14-day relative strength index for 13 of the index’s stocks is below 30, a signal to some investors that shares are poised to rise.

To contact the reporter on this story: Ian Sayson in Manila at isayson@bloomberg.net