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18 Januari 2021

MNCS Investment Strategy 18 January 2021

Recovery Story After the Big Reset

Investment Highlight: The investment theme of “Recovery Story after The Big Reset” reviews the attractiveness of investment in the Indonesian stock market after the negative impact of COVID-19. The JCI experienced a very significant decline of -37.48% to the level of 3,938 (March 24, 2020) due to investor panic over the health crisis which was feared to continue into an economic recession. Nevertheless, the reversal of direction on the stock market occurred very quickly, supported by: 1) The amount of US stimulus reached USD3 trillion; 2) Optimism of vaccine distribution; 3) The results of the US Election, namely the Blue Wave Scenario, succeeded in pushing the JCI to close at the level of 5,979 (-5.1% YTD) at the end of 2020. MNCS Institutional Research Team prioritized several cyclical and value stock sectors, especially the banking, mining, plantation and telecommunications sectors as the main picks. However, we are also looking at the consumption sector amidst the current downturn as it offers attractive valuations and potential recovery in 2H21. JCI is projected to grow to: 1) Base Case: 6,320; 2) Bull Case: 7,221; Bear Case: 5,651.

 

From Fear to Greed : JCI Index Rose by 25.67% since Nov’2020 to Mid Jan’21

JCI had recorded a significant decline of -36.67% YTD to the level of 3,989 on March 23, 2020. This was due to the fear of the COVID-19 pandemic affecting PSBB throughout Indonesia. Nevertheless, the recovery of the Indonesian stock market has occurred very quickly along with optimism over the COVID-19 vaccine and stimulus from developed countries which are believed to return to developing countries, especially Indonesia. The JCI recorded a significant increase of 25.67% from the 5,115 level (Nov 2nd 2020) to the level of 6,428 (Jan 14th  2021).

 

Euphoria of Vaccine and Economic Recovery in midst of Revival of Domestic Investor

The uprising momentum for JCI will continue in 2021, driven by optimism over the vaccine injection which has started on January 14th, 2021 and expectations of economic recovery. Indonesia's economic growth rate is projected to recover from -2% in FY20E to 4.5% - 5.5% in FY21F. President Jokowi gave confidence to the market by being the first person to receive the Sinovac vaccine injection. The efficacy of the Sinovac vaccine in Indonesia reaches around 65% and has met the minimum limit of the WHO at 60%, which is expected to encourage the recovery of the health crisis in Indonesia and ultimately have a positive impact on economic growth in 2021.

 

Stock Market Influencers through “xxxMology” Phenomenon are in the Hype Trend

MNCS observes that currently most of the acquaintances, friends or even informal workers who never knew or even wanted to invest in stocks have now become extraordinarily aggressive in becoming investors in the capital market. This is of course what drives the many influencers in the capital market to transform into market movers on social media.

 

Investment Strategy 2021 : Watch for Healthy Correction in Short Term, Still Bull for Long Term

MNCS believes that the bullish momentum of  JCI is still ongoing in FY21F. Some of the main risks to consider for the potential decline in the JCI in the short term: 1) The increase in COVID-19 cases in Indonesia, which continued to record an all time high, reached over 11,000 cases per day; 2) Mutation of the COVID-19 virus and the emergence of negative issues over the efficacy of the Sinovac vaccine; 3) The increasing political tension in the US awaits the inauguration of the US President;

 

Economic Recovery is underway; Move to Cyclical Sector and Valued Stock

Prospective sectors to be invested in in 2021 are: 1) Banking Sector; 2) Mining Sector; 3) Plantation Sector; 4) Telecommunication Sector; 5) Digital and ESG Sector. MNCS recommended several main preferred stocks that serve as proxies for economic recovery, such as: BBNI (BUY; TP: IDR8,100); BBCA (BUY; TP: IDR. 38,000); ASII (BUY; TP: IDR7,480); UNTR (BUY; TP: IDR33,700); TLKM (BUY; TP: IDR4,000); ICBP (BUY; TP: IDR12,500); GGRM (BUY: TP: IDR48,000). In addition, there are several potentials for temporary strengthening in the commodity stocks with preferred stocks: INCO (BUY; TP: IDR7,150);  and LSIP (BUY; TP: IDR1,920). Meanwhile, several Mid-to-Small Cap stocks that have the potential to record better fundamental performance include: ARNA (BUY: TP: IDR800); TOTL (BUY; TP: IDR510); BSDE (BUY; TP: IDR1,450).

 

Disclaimer On

BBNI, BBCA, ASII, GGRM, ICBP, TLKM, UNTR, INCO, LSIP, ARNA, TOTL, BSDE

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