Christopher Langner is a markets columnist for Bloomberg Gadfly. He previously covered corporate finance for Bloomberg News, and has written for Reuters/IFR, Forbes, the Wall Street Journal and Mergermarket.

Indonesia has been an oasis of relative calm in a sea of red for investors in Asia this year. The Jakarta Composite Index, up 5.3 percent since Dec. 31, is the region's only major benchmark in solid positive territory for the period. But apart from expectations of lower interest rates and a 2.8 percent rally in the rupiah, it would seem the nation's publicly traded companies have little to warrant such outperformance.

Solo Performer
The Jakarta Composite Index is the only stock market in solid positive territory in Asia this year
Source: Bloomberg

Investors are getting a 2.1 percent dividend yield from buying the index's stocks, below what the S&P 500 offers and less than half what Hong Kong's Hang Seng Index or Australia's S&P/ASX 200 are paying. The rally has made the bourse among the most expensive in the region by another value metric as well. Its price-to-earnings ratio is 26.5 times, behind only the Shenzhen Composite Index's 40 times and the 1,043 ratio boasted by Mongolia's fledgling stock market, which is heavily dominated by money-losing miners.

Growth expectations, meanwhile, are near the highest since 2009. Unless investors are seeing the prospect of a sudden economic acceleration in the commodity-dependent economy, there's little upside.

Capped Growth
The implied growth of the Jakarta Composite Index is near the highest in six years
Source: Bloomberg-compiled prices

A closer look at the overall health of Indonesian-listed companies is hardly more reassuring.

Currently, it would take three years of using their entire operating profits to pay back their debts, near the highest ratio since 2007. Combined, their cash and receivables are enough to cover bills due within the next 12 months by 1.2 times, also near the lowest in nine years. Total debt is equivalent to 74 times equity, the most since 2009.

Maxed Out
Companies in Indonesia's main index have 74 times more debt than equity, the most since 2009
Source: Bloomberg

Much of the money owed by Indonesian companies is in foreign currency, considering it's been cheaper to borrow in dollars than it has in rupiah. The trouble is, this group of borrowers has missed payments on as many as eight offshore bonds in the past five years, putting them behind only the Chinese in Asia's unreliability ranking. The recovery rate for these defaulted securities has been as low as 5 cents on the dollar.

Making Ends Meet
Indonesian companies have receivables and cash to pay 1.2 times what's due in the coming 12 months, near a nine-year low
Source: Bloomberg

When they're not borrowing in dollars internationally, Indonesian companies are taking foreign-currency loans at home. Hence banks, which have profited from this sort of lending before, are also at risk if the rupiah resumes its slide. And note that the financial sector makes up 22.8 percent of the Jakarta Composite Index's market capitalization. Another about 5 percent is comprised by miners and energy companies. In fact, as a whole, the country's stock exchange is heavily skewed toward commodities or products that face stiff competition globally, such as textiles.

Jakarta was up at the open on Monday, boosted by a positive mood in the region. Yet with so much uncertainty over key fundamentals, it's hard to see the market as a safe haven. Perhaps investors should take a cue from Ulysses to avoid temptation, and the inevitable shipwreck. Binding themselves to hard and fast numbers will drown out the siren song.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Christopher Langner in Singapore at

To contact the editor responsible for this story:
Katrina Nicholas at