December 19, 2024

Salmon Swim Upstream, You Shouldn’t

Market Commentary

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Yesterday morning, the fire alarm suddenly went off in the office. Everyone panicked and rushed down the emergency stairs.

It felt like being in an action movie scene, only this time, everyone was in office attire, clutching laptops instead of props.

The chaos was so intense that someone joked, "Is this a fire alarm or a reminder that the IDX drop 1.84%?"

And yes, it turned out to be just a fire drill. Once we got downstairs, most of us exchanged relieved smiles, well, most of us.

Those in capital market, however, weren’t exactly smiling. For them, fire on the IDX was still burning

Speaking of IDX “burning,” the rupiah is also melting. Oddly enough, even with the Fed starting to cut rates, things haven’t cooled down.

Instead of bringing calm, bond yields keep climbing. It doesn’t matter whether the Fed cuts rates or BI keeps them steady at 6.00%, the rupiah is still weak.

Even the mighty gold, often seen as the ultimate safe haven, is struggling to hold its ground in this high U.S. yield environment.

So, just like the fire alarm had us scrambling down the emergency stairs, it seems like the rupiah is also searching for an escape route, but it’s not sure where to go.

And the stock market? Even the big banks, with their solid fundamentals, are seeing their share prices plummet. It’s like they’re caught in the same “fire alarm” effect as IDX.

When the rupiah doesn’t know where to turn, we as investors must stay focused and avoid getting lost in the panic.

And one thing’s for sure, don’t act like a salmon!

You know, salmon swim against the current to lay their eggs. But for us, it’s different, don’t fight it, just follow it!

Take a closer look, market flow right now is moving away from banks. No matter how strong their fundamentals are, investors just don’t seem interested.

On December 18th alone, the top 4 biggest net foreign sells were the top 4 largest banks in Indonesia.

So, don’t force it. Jumping in now might trap you even deeper. Unless you ample ammunition and can hold it in the long run.

What’s the solution?
We look for stocks in companies that are dollar earners. In times when the rupiah is “melting,” companies earning in dollars actually benefit.

For example, the energy sector. We recommend going long on stocks like ENRG, ADRO, or AADI.

Let’s talk about the newcomer, AADI, which recently debuted on the stock exchange. Even though it’s still a “rookie,” its performance is already catching investors’ attention.

In its first year post-IPO, AADI plans to distribute a dividend payout ratio of 45%. Based on its current share price of IDR 8,375, that translates to a 13% dividend yield, a very attractive figure for investors.

AADI’s revenue is expected to stay strong, with annual coal sales of 62-64 mn tons at an average price of USD 66/ton. This supports annual profits of approximately USD 923 mn for the next five years.

With solid fundamentals, a strong financial position, and promising growth potential, we recommend a BUY for AADI, with a target price of IDR 30,100.

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