Disclaimer: Nothing in this post shall be construed as financial advice. Mentions of stock is not a recommendation to buy, sell or hold. This post is purely for educational and informational purposes only.
BBRI went down over 20% since late March, losing over IDR 237 Trillion market cap value in less than 2 months. We got a lot of questions regarding BBRI, so I’ll explain the reason for the steep drop for you guys.
Its important to know BBRI isn’t the only stock to drop steeply recently, a lot of blue chip stocks experienced a similar drop over the same time period. A major reason for the drop is the aggressive selling by foreign investors. To wit:
There is a considerable amount of foreign money in IDX that tracks our index. If you look at KSEI data as of April 2024, Foreigners own ~Rp 3,300 T in Indonesian stocks where as the entire market capitalisation of IDX is ~Rp 12,000T. So yes, >25% of stocks here in Indonesia is owned by foreigners and understanding how they invest can be useful.
These guys invest very differently from local funds. If these guys are bullish on Indonesia as a country, they would buy the whole index to get exposure in our country. The components of index are generally weighted by market cap - the biggest market cap companies have the biggest weights in the index. In IDX the big banks have the biggest market cap and gets a lot of weight in our index.
So, if these guys are bullish on Indonesia, they would buy our index as a whole and would indirectly buy a lot of big bank stocks. On the contrary, if these guys are bearish, they would sell our index as a whole and would indirectly sell a lot of big bank stocks.
A strong foreign net sell in the biggest market cap stocks is an indication that these guys are bearish towards Indonesian stocks as a whole. There are macro reasons for the selloff. The major one being uncertainty when US interest rates will drop, which in turn will affect interest rates in Indonesia given that BI tends to follow what the fed does to stabilize the rupiah. The global market seems optimistic that the fed will soon pivot and drop interest rates, and any sign of ‘higher for longer’ that is often mentioned in the recent speeches by fed chairman Jerome Powell resulted in selloffs.
Financial statements below expectations
BBRI released it financial statements for Q1 2024 on 25th April, this was followed by a strong selloff and a steep drop in its price.
This graph sums up why investors were disappointed:
Notice how how their new guidance for 2024 were worse across the board from the initial guidance released on 31st Jan 2024.
BBRI is a relatively expensive stock, and investors tend to have high expectations for BBRI. The slightest disappointment in earnings can lead to aggressive selloff like we saw in the days after their earnings report. Yet the stock wouldn’t have dropped like it did if there were buyers to buy the dip. You might think local funds would take an interest in BBRI after a strong correction from the foreign selloff, and you’d be right except that most of them already own BBRI in their portfolio and most do not have a lot of room to add more. So if local institutions do not have the flexibility to buy BBRI, this leaves retail investors to provide the flow to buy the BBRI dip. Unfortunately, the demand from retail investors is nowhere near enough to keep up with the selloff from foreign investors. What we saw happened to BBRI is a typical example of what usually happens when local retail investors goes against institution money - they often lose.
So is this a good time to buy BBRI??
Market timing is very difficult, it is hard to know for sure when the foreign selloff will end. However, historically the big banks in IDX are the main reason why our index has experienced respectable growth the past few decades. Good time to buy BBRI always fallsback on your investment objective and if you believe that BBRI would be able to sustain its growth into the future.