Investors have also moved from cyclical stocks to defensives, making both companies less attractive in the current macro environment.
Among the worst performers on the regional benchmark index this year, Indah Kiat has tumbled 14% after a 114% gain in 2018. While its affiliate Tjiwi Kimia fell to the lowest this year on May 17, after posting a 280% increase last year. Both companies are owned by Indonesian conglomerate Sinar Mas. “There was an euphoria in the past because of rising pulp prices, cheap valuation and tax holidays for new plants from the government,” said to Willinoy Sitorus, an analyst at PT Trimegah Sekuritas. But now, investors are flocking to large caps – generally seen as a safe haven – amid uncertain times with a trade war still in the picture and slowing global growth still a concern, he said.
“It’s been a perfect storm of negative headlines for pulp over the recent month, driving ongoing uncertainty in the market,” Tavarez said in the report. “Don’t expect a sharp rebound in prices given inventory overhang and limited downtimes.”