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(Updates with closing index prices in sixth paragraph.)
Sept. 12 (Bloomberg) -- Indonesian stocks have become more attractive to overseas investors after the world’s fourth-most populous nation overtook Malaysia as Southeast Asia’s second- largest equities market by value, PT Panin Sekuritas said.
“Foreign investments into Indonesian stocks will likely increase as portfolios are weighted in line with the size of a nation’s stock market,” Winston Sual, who helps manage $991 million at Jakarta-based Panin Sekuritas, said in a Sept. 9 interview. The firm’s $407 million Panin Dana Maksima fund has climbed 40 percent in the past year, beating 35 rival funds, according to data compiled by Bloomberg.
The value of Indonesian equities surged 17 percent to $416 billion this year to Sept. 9, surpassing Malaysia’s $407 billion to become the ninth-biggest stock market in Asia. Singapore’s stock market is the biggest in Southeast Asia at $523 billion. The Jakarta Composite index has risen 8 percent in 2011 through last week, compared with a 3.3 percent drop in the FTSE Bursa Malaysia KLCI Index.
Foreign investors stepped up buying of Indonesian shares as China and India increased demand for coal and palm oil, benefiting companies such as PT Bumi Resources and plantation owner PT Astra Agro Lestari. Rising incomes have also spurred domestic spending, lifting consumer companies including PT Astra International, the biggest automotive retailer.
“Indonesia’s economy is the largest in Asean and it is resilient because of strong domestic consumption,” Panin’s Sual said, referring to the Association of Southeast Asian Nations.
The Indonesian economy, the largest in Southeast Asia, will likely expand 6.5 percent this year, the fastest pace since the 1998 Asian financial crisis, President Susilo Bambang Yudhoyono said Aug. 16. That compares with the Malaysian central bank’s estimate for growth of as much as 6 percent.
Indonesia’s stock index dropped 2.6 percent to close at 3,896.12 in Jakarta, its biggest drop since Aug. 19. The Kuala Lumpur benchmark index slid 1.6 percent to 1,446.26, compared with a 1.9 percent fall in the MSCI Emerging Markets Index.
Bank Indonesia kept its benchmark interest rate unchanged on Sept. 8 at 6.75 percent for a seventh month to help support domestic consumption, which accounts for about 56 percent of the economy.
Indonesia’s population of 243 million ranks behind only those of China, India and the U.S. By contrast, Malaysia has about 28 million people and Singapore 4.7 million, U.S. Census Bureau data show.
“There will be more investments going into the stock market as people are looking for a growth story,” Lye Thim Loong, who helps manage about $770 million at Libra Invest Bhd. in Kuala Lumpur, said. “We have been very actively investing in Indonesia. You have the population to sustain a domestic consumption story.”
Overseas investors bought a net $1.7 billion of Indonesian shares this year through August, according to data compiled by Bloomberg. Foreign investors sold a net 500 million ringgit ($166 million) of Malaysian stocks this year through August, according to data from the Kuala Lumpur stock exchange and Credit Suisse Group AG.
--Editors: Darren Boey, Barry Porter
To contact the reporter on this story: Berni Moestafa in Jakarta at email@example.com; Chan Tien Hin in Kuala Lumpur at firstname.lastname@example.org
To contact the editor responsible for this story: Darren Boey at email@example.com