The movement of financial stock prices throughout 2016 lagged behind the Indonesia Stock Exchange Composite Index (IHSG), as shown in the graph below. Between January 4th and October 25th, 2016, financial stock prices only rose 16.9 percent, while the IHSG strengthened by 19.31 percent. Index calculation: January 4th, 2016 = 100.
The financial index, dominated by banking stocks, showed somewhat restrained movement and underperformed the IHSG due to investor pessimism regarding the performance of banking issuers throughout 2016, which was expected to slow down. Falling interest rates, slowing credit growth, and rising non-performing loans made investors very cautious about accumulating banking stocks.
Investor concerns proved valid. The profits of large-capitalization banking issuers such as Bank Mandiri (BMRI) fell by 17.62 percent in the first three quarters of 2016 compared to the same period in 2015. Between January and September 2016, Bank BRI only recorded a 2.9 percent profit growth compared to the same period the previous year.
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