Alpha Picks
Strategy - Alpha Picks: Earnings Resilience Amid MSCI Uncertainty
Highlights
- October sell-off: Our picks fell 13.9%, outperforming the JCI’s 18.1% decline by 4.3%.
- November remains challenging: Commodity-led earnings growth faces rising yields, elevated input costs and MSCI-related flow risks.
- Retain our existing picks but add UNVR as its operating recovery and dividend prospects support its inclusion, despite continued margin pressure.
What’s New
- October: MSCI shock triggered another broad sell-off. The JCI fell 18.1% mom in Oct 26 after the MSCI lanched a consultation to reclassify Indonesia from EM directly to Standalone Market status, pushing the index below 5,000 during the month. Infrastructure (-27.4%), basic materials (-25.3%), industrials (-24.3%), and energy (-23.1%), recorded the steepest declines while financials (-9.8%) and healthcare (-11.1%) relatively outperformed. The rupiah weakened a further 1.4% against the US dollar. Our 10 picks declined by an average of 13.9%, ourperforming the JCI by 4.3%. AADI (3.4%) and ASII (+2.9%) were only positive performers, while CMRY (-4.4%) and ELSA (-4.5%) were relatively defensive. BULL (-34.4%) and EXCL (-30.0%) recorded the largest declines, followed by INKP (-21.5%) and BBCA (-19.4%).
- November outlook: Solid earnings face a toughter macro environment. Of the 43 companies under our coverage that reported 9M26 results, 42% beat our estimates, 28% were in line, and 30% missed. Aggregate revenue and net profit grew 13% yoy and 19% respectively, but growth moderated to 7% for both after excluding commodity companies, pointing to more modest underlying earnings momentum. Looking ahead, the rising global bond yield will pressure the rupiah and limit Bank Indonesia’s (BI) policy flexibility, leading to an increase the cost borrowing, while elevated oil prices and El Nino-related food inflation could weaken purchasing power and keep input costs elevated. We therefore expect an uneven recovery led by companies with pricing power, defensive earnings, low leverage, and strong cash flows.
- MSCI remains the main structural overhang. The proposed reclassficiation of Indonesia from EM directly to Standalone Market status could keep foreign participation low and valuations depressed throughout the consultation period, which runs until 30 Apr 27, with final decision due by 30 Jun 27. In the near term, MSCI will announce its quarterly review on 11 Nov 26, with changes affective on 1 Dec 26. Based on their US$ free-float-adjusted market capitalisation, we estimate that BRPT, BRMS, and UNTR will be screened as potential deletion candidates. UNTR faces additional risk from a possible FIF reduction following its share buybacks. These remain our estimates, as the final thresholds, price cut-off and free-float treatment will be determined by MSCI.
Highlights
- October sell-off: Our picks fell 13.9%, outperforming the JCI’s 18.1% decline by 4.3%.
- November remains challenging: Commodity-led earnings growth faces rising yields, elevated input costs and MSCI-related flow risks.
- Retain our existing picks but add UNVR as its operating recovery and dividend prospects support its inclusion, despite continued margin pressure.
What’s New
- October: MSCI shock triggered another broad sell-off. The JCI fell 18.1% mom in Oct 26 after the MSCI lanched a consultation to reclassify Indonesia from EM directly to Standalone Market status, pushing the index below 5,000 during the month. Infrastructure (-27.4%), basic materials (-25.3%), industrials (-24.3%), and energy (-23.1%), recorded the steepest declines while financials (-9.8%) and healthcare (-11.1%) relatively outperformed. The rupiah weakened a further 1.4% against the US dollar. Our 10 picks declined by an average of 13.9%, ourperforming the JCI by 4.3%. AADI (3.4%) and ASII (+2.9%) were only positive performers, while CMRY (-4.4%) and ELSA (-4.5%) were relatively defensive. BULL (-34.4%) and EXCL (-30.0%) recorded the largest declines, followed by INKP (-21.5%) and BBCA (-19.4%).
- November outlook: Solid earnings face a toughter macro environment. Of the 43 companies under our coverage that reported 9M26 results, 42% beat our estimates, 28% were in line, and 30% missed. Aggregate revenue and net profit grew 13% yoy and 19% respectively, but growth moderated to 7% for both after excluding commodity companies, pointing to more modest underlying earnings momentum. Looking ahead, the rising global bond yield will pressure the rupiah and limit Bank Indonesia’s (BI) policy flexibility, leading to an increase the cost borrowing, while elevated oil prices and El Nino-related food inflation could weaken purchasing power and keep input costs elevated. We therefore expect an uneven recovery led by companies with pricing power, defensive earnings, low leverage, and strong cash flows.
- MSCI remains the main structural overhang. The proposed reclassficiation of Indonesia from EM directly to Standalone Market status could keep foreign participation low and valuations depressed throughout the consultation period, which runs until 30 Apr 27, with final decision due by 30 Jun 27. In the near term, MSCI will announce its quarterly review on 11 Nov 26, with changes affective on 1 Dec 26. Based on their US$ free-float-adjusted market capitalisation, we estimate that BRPT, BRMS, and UNTR will be screened as potential deletion candidates. UNTR faces additional risk from a possible FIF reduction following its share buybacks. These remain our estimates, as the final thresholds, price cut-off and free-float treatment will be determined by MSCI.
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