Manulife Indonesia Sees 19% Stocks Rally as Cash at 2014 Low

Indonesia’s second-biggest mutual fund manager has reduced cash holdings to the lowest level since at least December, shifting to stocks in a bet the benchmark index will jump 19 percent by next year.

The Jakarta Composite Index may climb to 6,200 by the end of 2015, from a close of 5,205.32 yesterday, according to Alvin Pattisahusiwa, who oversees $4 billion as director of investment at PT Manulife Aset Manajemen Indonesia. Cash in the company’s three non-shariah equity funds fell to an average 6.21 percent of assets in July from 10.16 percent the previous month, according to fact sheets compiled by Bloomberg.

The Jakarta Index has advanced 22 percent this year on speculation President-elect Joko Widodo will take steps to revive growth in Southeast Asia’s largest economy. It rose 0.2 percent to 5,217.335 at today’s close. The rally will extend as Widodo, the outgoing Jakarta governor known as Jokowi, cuts energy subsidies to narrow the budget deficit and fund spending on infrastructure, health care and education, according to Pattisahusiwa.

“We’re still bullish on the outlook for stocks, so holding cash is not an option in managing our funds for the time being,” he said in a Sept. 3 interview in Jakarta.

Pattisahusiwa prefers banks, along with mining and manufacturing companies that are better placed to withstand the impact of increased fuel costs. He declined to name specific stocks he’s buying, citing company policy.

Subsidy Cut

The measure for miscellaneous industries, which includes manufacturing companies, advanced 1.2 percent today, the most among 10 industry groups. PT Astra International, the largest company in the Jakarta index by market value, rose 1.3 percent.

A gauge for financial stocks added 0.4 percent to a record high. PT Bank Central Asia, the country’s largest lender by market capitalization, gained 2.5 percent to an all-time high. PT Bank Negara Indonesia climbed 1.8 percent to its highest close in 15 years.

The money manager’s estimate for gains in the Jakarta gauge compares with the 6.4 percent projected increase over 12 months derived from analysts’ share price-targets for index companies compiled by Bloomberg.

Arief Wana, who as manager of PT Ashmore Asset Management Indonesia’s Dana Progresif Nusantara fund is the nation’s top-performing stock picker, forecast last month the benchmark index would climb to 6,000 by the end of next year, a 15 percent gain from yesterday’s close.

Jokowi, who takes office next month, may curb subsidies as he seeks to raise the country’s official 2015 growth target to 5.8 percent, from the 5.6 percent level proposed by the current government, Arif Budimanta, a member of his economic team, said in an interview on Sept. 2.

About $24.9 billion is earmarked for fuel subsidies in the 2015 budget drafted by the administration of outgoing President Susilo Bambang Yudhoyono. The nation would save 48 trillion rupiah ($4.08 billion) with a fuel-price increase of 1,000 rupiah a liter starting in January, Finance Minister Chatib Basri said on Sept 3.

Fund Holdings

“The fuel-price increase is needed so the government can go ahead with its program, and it’s seen as short-term pain for long-term growth,” Pattisahusiwa said.

About one-third of assets in the three Manulife equity funds were allocated to financial stocks at the end of July, and the top holdings were auto distributor PT Astra International, phone company PT Telekomunikasi Indonesia, and lenders PT Bank Central Asia and PT Bank Mandiri, according to data compiled by Bloomberg.

The value of assets in the funds slipped to 4.7 trillion rupiah in July, from 4.8 trillion rupiah the previous month, as some customers redeemed investments, which were paid using cash holdings rather than selling stock, Pattisahusiwa said.

The benchmark Jakarta gauge is valued at 15.2 times projected 12-month earnings, a 31 percent premium over the MSCI Emerging Markets Index. Foreign investors bought a net $4.89 billion of Indonesian stocks this year through Sept. 4, according to data compiled by Bloomberg.

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