Indonesian Stocks Fall as Ministry Unveils New Franchise Law

Indonesian stocks reversed yesterday’s gains, falling 0.33 percent, as shares in household retails slumped after the government announced a new law limiting the number of franchised operations.

The benchmark Jakarta Composite Index shed 14.31 points to close at 4,350.29 after yesterday’s record high. Some 4.3 billion shares valued at Rp 3.8 trillion ($394 million) changed hands on the Indonesia Stock Exchange (IDX). Decliners beat gainers 154 to 96.

The Ministry of Trade issued a regulation limiting the number of company-owned outlets to 150 and said the remaining expansion must be sub-franchised, according to a statement on the ministry’s website.

Shares in 7-Eleven franchise holder Modern Internasional fell 1.33 percent to close at Rp 740. Retailer Mitra Adiperkasa dropped 0.76 percent to Rp 6,550.

Minimarket operator Sumber Alfaria remained flat.

The wider consumer goods sector fell 1.17 percent by closing, according to Bloomberg data.

Shares in noodle-maker Indofood Sukses Makmur slumped 1.72 percent to Rp 5,700 after the nation’s largest food maker posted disappointing third quarter results.

Unilever Indonesia fell 0.38 percent to Rp 26,050 a share after reaching yesterday’s five-week high.

UBS Investment Research raised its target price on Unilever Indonesia to Rp 19,100 from Rp 13,500 per share after the consumer goods producer reported better-than-expected earnings before interest and tax (EBIT).

However, the research house kept its “sell” rating on the stock due to its expensive valuation, downside risk of earnings forecasts due to rising costs and higher competition, and the limited potential on stock price increases.

Bank Mandiri, Indonesia’s largest bank by assets, fell 1.79 percent to Rp 8,250. The research house raised its target price to Rp 9,300 a share, but kept its “neutral” rating over concerns of minimal loan growth.

“Its loan-to-deposit ratio (including bonds) is already 103 percent. The simple loan-to-deposit ratio is also at 85 percent,” UBS said. “It has not been able to sell its 78 trillion rupiah government bond portfolio to help finance loan growth.”

The Indonesian rupiah was steady, trading at Rp 9,624 per dollar. The government’s yield on 10-year bond notes fell to 5.720 percent from 5.726 percent.

Reuters/JG