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Stocks: Losers and Gainers

StockPrice Price Change
ISX:SRTGIDR 6,000.0025.00%
ISX:COCOIDR 665.0024.30%
ISX:PCARIDR 468.0022.51%
ISX:FMIIIDR 870.0020.00%
ISX:JIHDIDR 500.0016.82%
ISX:PPGLIDR 138.00-9.80%
ISX:GHONIDR 1,730.00-6.99%
ISX:POLUIDR 600.00-6.98%
ISX:DEALIDR 147.00-6.96%
ISX:PUREIDR 214.00-6.96%

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Buffett Indicator: Indonesia Stock Market Valuations and Expected Future Returns

Updated at Sun, 24 Jan 2021 20:30:05 -0600
Country: Indonesia (updated daily) check out Global Overview for detailed methodology.

The Stock Market is Modestly Undervalued.

Ratio of total market cap over GDP: Recent 10 Year Maximum - 53.23%; Recent 10 Year Minimum - 24.98%; current - 31.4%
Expected future annual return: 11.0%

ETF Used for dividend yield: EIDO (Yield=1.09%)
Market Index used: Jakarta Composite Index
Current Annual GDP: $1,241 billion US dollars or 17,443,400 in billions of national currency (GDP in Local Current Prices Annual Growth=6.45%)
Data since year 1990


Indonesia Historical GDP Growth

Historical GDP of Indonesia in billions of national currency. The GDP in local current prices has grown at the annual rate of 6.45% over the past 8 years. Please note this growth rate includes the effect of price inflation and it is NOT the real GDP growth rate. Current Annual GDP: $1,241 billion US dollars or 17,443,400 in billions of national currency.

Indonesia GDP (Billion, National Currency)

Historical Stock Market Cap

Historical total market of Indonesia in billions of national currency. This value is normalized using the data published by WorldBank. Jakarta Composite Index is used for the normalization. an index of all stocks that trade on the Indonesia Stock Exchange.

Indonesia Total Market Cap (Billion, National Currency)

Historical Ratio of Total Market Cap over GDP (%)

The current ratio of total market cap over GDP for Indonesia is 31.4%. The recent 10 year high was 53.23%; the recent 10 low was 24.98%. If we assume that the ratio will reverse to the recent 10 years mean of 41.21% over the next 8 years, the contribution to expected annual return is 3.46%. This is the detailed historical chart of the ratio.

Indonesia Ratio of Total Market Cap over GDP (%)

Based on these historical valuations, we have divided market valuation into five zones:

Ratio = Total Market Cap / GDP Valuation
Ratio ≤ 29% Significantly Undervalued
29% < Ratio ≤ 37% Modestly Undervalued
37% < Ratio ≤ 45% Fair Valued
45% < Ratio ≤ 54% Modestly Overvalued
Ratio > 54% Significantly Overvalued
Where are we today (2021-01-25)? Ratio = 31.4%, Modestly Undervalued

Predicted and Actual Returns

From the equation presented on the U.S. market valuation page,

Investment Return (%) = Dividend Yield (%) + Business Growth (%) + (Re/Rb)(1/T)-1

We can compute the predicted and actual returns of the Indonesia stock market over a given time period, T. In the calculation, we set T to equal eight years, the approximate length of a full economic cycle. The calculated results are presented in the chart below. The green line indicates the expected, or predicted return if the market ratio trends near the recent 10 years average ratio of 41.21% over the next eight years.

The blue line indicates the actual, annualized return of the Indonesia stock market over eight years. We use “Jakarta Composite Index” to do the actual return calculation. We can see the calculations largely predicted the trend in the stock market as the blue line is closely parallel to the green line.

Predicted and Actual Returns of Indonesia

Conclusion

The stock market of Indonesia is expected to return 11.0% a year for the coming years. This is from the contribution of economic growth in local current prices: 6.45%, Dividend Yield: 1.09% and valuation reverse to the mean 3.46%.

This is the projected return of the stock market in Indonesia relative to other countries. Click on each bar in the chart to go to other countries:


You can go here to see what international stocks Gurus are buying.

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