Mega Talkshow Investment 2020, The Intelligent Investor with Lo Kheng Hong

Written by Student Reporter, Salsabila Mayang (Management 2020)

Up to now, the number of capital market investors in Indonesia is still relatively low, out of 265 million Indonesians, only 1 million have a stock account or less than 1 percent. That was said by the Dean of SBM ITB Prof. Sudarso Kaderi Wiryono in his speech at Investment Mega Talkshow 2020 at Aula Barat ITB, Saturday (7/3/2020). This event presents speakers who are also practitioners in capital market investment. Lo Kheng Hong, Erman Sumirat, Haryajid Ramelan, OJK, IDX, and Indopremier Securities. This event is expected to increase financial literacy on the capital market to students and general public, as well as increase the number of domestic retail investors. Based on Indonesian Stock Exchange records, the level of Indonesian people’s participation in investing in the capital market in 2017 is still around 0.2 percent. This figure is far below Malaysia at 12.8 percent, China 13.75 percent, and Singapore 30 percent.

According to Hasan Fawzi as Director of Business Development Indonesia Stock Exchange (IDX) explained that in the past 10 years, growth rate of return on stock in Indonesian capital market could reach +148.57 percent or +9.53 percent annually based on Jakarta Composite Index. This return also does not include the distribution of dividends per period that can be obtained by investors. He also stated that Indonesia has the Best Islamic Capital Market in the global and Stock Exchange with the largest supply of public-listed companies in South East Asian. Lately, the decline in stock index since the beginning of this year occurred in the majority of global and regional stock exchanges. In 2013, Indonesia’s composite stock index experienced a decline but it was followed by 2014 which could increase significantly. This can also occur this year which is heavily influenced by negative sentiment due to the global issue of the spread and impact of COVID-19, British Exit, US Central Bank Monetary Policy, and US Elections in November 2020.

However, Indonesian capital market continues to grow in terms of products and the involvement of market participants, including investors, which has continued to increase from 466 thousands in 2014 to 1.3 millions and there have been 680 public-listed companies in 2020. In line with that, the domestic investor base also increases by a ratio of 60% of securities trading activity dominated by domestic investors rather than foreign investors in 2020. “The good and bad of issuers in the capital market is a necessity, but the disclosure of related information is the responsibility of Indonesia Stock Exchange.” Hasan stated.

 

Main role of IDX is to conduct regular, fair and efficient securities trading. This is done by providing regulations, facilities and infrastructure, ensuring information disclosure, conducting oversight, creating new instruments and products, and seeking liquidity. Unusual Market Activity (UMA) and Suspension become notification that provides information on transaction patterns and abnormal stock price increase. Number of other factors also become primary challenges for IDX, especially the literacy and financial inclusion of Indonesian people to capital market. Furthermore, Financial Services Authority (OJK) which oversees IDX is also mandated to have a role in increasing investor protection in the capital market for a healthy financial industry.

In essence, the best protection that can be anticipated by investors is to add competence through strong analysis within investment and trading. Haryajid Ramelan from Indonesian Securities Analyst Association explained about the importance of having knowledge in securities analysis. To become an intelligent investor, analysis can include the analysis of economic conditions, analysis of industry performance, and analysis of company performance that is targeted for investment. All analyzes are carried out using a fundamental approach which has to be objective and will lead to recommendations. “Running trade can sometimes be subjective and wrong, so a fundamental approach is necessary. Behind all the analysis, the most important thing to show is clear and good business prospects.” said this 27 years professional in capital market. He also emphasized on the philosophy of stock investment for a long period of time.

Learning from the richest stock retail investor in Indonesia, Lo Kheng Hong, or commonly referred as Warren Buffet Indonesia, believes that being a stock investor can make him rich, even though he only sleeps, he never worries as long as he has a public company that has good management and generate big profits. He was born on February 20, 1959 in the modest family that was arguably not quite economically sufficient. He used to live in a 4×10 meter house, without a ceiling and only had a roof and walls made of boards. He used to work for 11 years as a clerical employee at a bank that had never expanded. Then getting to know stocks in 1989, Lo Kheng Hong started investing all of his salary to buy stock in Indonesia capital market. Saved money and always set aside money to buy shares. After 29 years, the value of its shares continued to increase and now reach more than trillion. According to him, stocks are assets that provide the best return among other liquid assets such as gold, government bonds and bank deposits.

“The greatest treasure trove of wealth in the world is in the capital market. Not under the sea, because the value is real and transparent. It is unfortunate if there are people who do not know the capital market.” He believes that the signs of a great person in investing stocks is to buy shares based on fundamentals and company performance, not merely based on charts, graphs, and issues. Technical analysis emphasizes the volume, charts and price movements in selecting stocks. According to Warren Buffet, that does not mean anything, Buffett instead emphasizes on the value of a business.

A study by PriceWaterhouseCoopers conducted in 2016 showed that the performance of stocks listed on the IDX had the highest growth rate among the world’s major exchanges over the past 10 years. “Never buy a cat in a sack. Growing rich within growing company.” said Lo Kheng Hong. Consider the company’s management factors, whether or not implementing good corporate governance (GCG). Value investing is knowing great company performance by reading and understanding financial statements of public companies ranging from cash flow, balance sheets, income statements, and others.

Both Warren Buffet and Lo Kheng Hong’s investment thesis is so simple. But not everyone wants to get rich slow, because the preferences of Indonesian investors lack of financial literacy and tend to be speculative, ignore the importance of research on the performance of a company since they want to gain everything in quick and it makes them easily influenced by short issue and fluctuation. In a volatile stock market condition, “Don’t panic selling in the middle of IHSG down condition. Invest in bad times. Sell in good times. And you will get rich.” Lo Kheng Hong recommends. Doing things consistently for years is the key to calm retirement. This talkshow themed on being an intelligent investor, how to conquer yourself and market was conducted by MBA ITB aims purely for financial literacy about investment, invited everyone want to invest not based on speculation, because “the more you learn, the more you earn.”