REPUBLIKA.CO.ID, JAKARTA -- Indonesia's economic slowdown this year has not stopped shares of construction companies from surging, and some brokerages see them going higher in 2015 - thanks to hope that billions of dollars of infrastructure projects will start.
The country has long needed to spend heavily to upgrade its creaky infrastructure. The hopes that it finally will are rooted in plans by President Joko Widodo, who began a five-year term in October.
Proposals to build a mass rapid transport system for traffic-choked Jakarta languished for decades until Widodo got the project going after becoming the capital's governor in 2012.
Shares of PT Wijaya Karya's, a state-controlled construction that's part of the consortium building the subway, have doubled this year. Other state-controlled firms have fared even better. PT Waskita Karya and PT Pembangunan Perumahan have nearly tripled. Shares of Waskita closed on Wednesday at 1,200 IDR (10 US cents), up from 405 IDR at the end of 2013. The biggest privately-controlled construction firm, PT Total Bangun Persada Tbk has gained about 120 percent.
On average, 13 listed construction firms on the Indonesian exchange have climbed 90 percent this year. The market's benchmark index is up about 20 percent. Construction shares are now expensive, with some priced close to 30 times their earnings, compared to a average price-earnings ratio of about 16 for the market.
Investors are willing to value construction stocks at a hefty premium, Andriyanto said, a portfolio manager at Ciptadana Asset Management, which has been accumulating such shares this year. But at current valuations, Ciptadana finds it's time for a pause.
"When there are dips in prices, we will add to our position in the construction sector," Andriyanto said.
Stoking optimism among some is the priority Widodo is putting on infrastructure. His mid-November move to slash fuel subsidies was done in part to free up budget funds for infrastructure spending next year.
For sure, Widodo faces plenty of obstacles to getting stalled infrastructure work onto a fast-track. He lacks a parliamentary majority and also has to fight decades of entrenched cronyism, red-tape and land-acquisition challenges.
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