Indonesia has been experiencing slowing economic growth since 2011 (when it recorded a GDP growth rate of 6.5 percent y/y). This development is caused by external factors (sluggish global demand causing falling commodity prices and capital outflows due to monetary tightening in the USA) and internal factors. Internally, Indonesia has been implementing economic reforms since 2013 (scrapping of energy subsidies) to relieve the government budget deficit. However, inflation accelerated sharply due to these structural reforms. In both 2013 and 2014 inflation was recorded at 8.4 percent (y/y). In a move to combat inflation (and limit capital outflows) Indonesia’s central bank (Bank Indonesia) gradually raised its key interest rate (BI rate) from 5.75 percent in June 2013 to 7.75 percent in November 2014 as well as targeting for slowing credit growth in Southeast Asia’s largest economy. This context (higher borrowing costs) is certainly not conducive for further expansion of Indonesian financial institutions. However, it did not manage to curb impressive growth of Bank Central Asia’s shares in 2014 as Indonesia is still in an early stage in terms of financial inclusion (meaning that many Indonesians still lack access to basic financial services).

Bank Central Asia Financial Performance 9M 2014 (in IDR million):

Stock Quote Bank Central Asia - BBCA:

Meanwhile, the performance of shares of Indonesia’s second-largest company in terms of market capitalization, Astra International, was limited, growing 9.2 percent in 2014. About half of Astra’s profit is accounted for by the company’s car segment. As Indonesian car sales in 2014 are expected to be equal to car sales in 2013 (1.2 million vehicles) amid consumers’ weakening purchasing power (higher borrowing costs and higher fuel prices), the company has limited room for growth in this segment. Forecasts for Indonesia’s automotive sector in 2015 are bleak due to intensified competition in the car industry as well as higher labor costs. Amid weaker purchasing power it is difficult for the company to raise wholesale prices without jeopardizing sales figures (as many car parts are still imported using US dollar, the company therefore needs to absorb the negative impact of the depreciating rupiah). Meanwhile, other main business pillars of Astra (heavy equipment and palm oil) have also shown sluggish performance in 2014.

Stock Quote Astra International - ASII:

Astra International's stock chart shows a sharp fall in early June 2012 as the company conducted a 1:10 stock split, thereby making the company's shares more affordable and increasing its liquidity

Top Market Capitalization at end-2014:

Company   Market Capitalization
Bank Central Asia          IDR 320 trillion
Astra International          IDR 301 trillion
HM Sampoerna          IDR 295 trillion
Telekomunikasi Indonesia          IDR 289 trillion
Bank Rakyat Indonesia          IDR 285 trillion
Bank Mandiri          IDR 249 trillion
Unilever Indonesia          IDR 246 trillion
Perusahaan Gas Negara          IDR 145 trillion
Gudang Garam          IDR 117 trillion
Bank Negara Indonesia          IDR 113 trillion

Source: Neraca