Commercial Property stocks have gained highest profit this year

The Indonesia Stock Exchange have revealed that investors who concentrated on property, infrastructure and banking stocks have gained the highest profit so far this year, standing out as Indonesia’s top performers. All sectoral indices contained within the benchmark stock index of Indonesia, referred to as the Jakarta Composite Index (IHSG) have also shown good performance. Indonesia's IHSG has grown by 16.14% during 1^st January to 26^th May, this year.

The property sectoral index of Indonesia grew by 28.15% between 1^st January and 26^th May, followed by the financial (up 23.62%) and infrastructure (up 17.99%) sectors. With the exception of healthy general economic growth, the property and infrastructure sectors gained a boost from the political agendas of two presidential candidates – Prabowo Subianto and Joko "Jokowi" Widodo. Both candidates target accelerated infrastructure growth, with improved quantity and quality of infrastructure, whereby investments in real estate and property become more attractive.

This year, net profit of listed property companies is forecasted to grow further, supported by last year's orders. Therefore, stocks of property companies will excel this year. An analyst at MNC Securities believes the Ciputra Development and Bumi Serpong Damai are good property stock picks. The former has ‘expansive nature’ as the latter has shown large land banks.

During recent years, Indonesian banks have been amongst the most profitable banks in the world. Last year, Bank Indonesia has effectively attempted to decelerate credit growth which was standing at approximately 20% (year-on-year), to safeguard financial stability for high inflation and to cool economic growth. Low credit penetration in conjunction with healthy economic growth are the principal sources of Indonesian banks' profitability. Profitability is also supported by the large gap (7% average), between the banks offer rates for deposits and the banks offer rates for loans. Meanwhile, the non-performing loan (NPL) ratio has remained safe at a level less than 2% at most of the country's major lenders. This year, credit growth is assumed at 15 to 17% (y-o-y). The price to earnings ratio (PER) of banking stocks is still appealing at 12 to 13 times.