JCI Held Back by High P/E Ratio

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  • TEMPO.CO, Jakarta – High price-to-earnings ratio (P/E) and stock valuation caused the domestic stock market to consolidate throughout the week. Widhi Indratmo Nugroho, analysts from Lautandhana Securindo, said the two factors also caused the Jakarta Composite Index (JCI) to flatten last week.

    According to Widhi, the JCI's P/E is now too expensive at 18 times, putting the market in an overbought zone. "Because the P/R is too high, the JCI finally can only move flat," he said.

    The index rate is also influenced by The Fed's plan to raise interest rates as a response to US' August nonfarm payroll data, which is expected to grow to more than 200,000 people.

    Widhi projected the JCI to move up this week, albeit still fluctuating. For the beginning of the week, the index is expected to move between 5,200-5,260 bps only.

    To minimize risk, investors are advised to keep an eye on construction stocks such as ADHI, WIKA, and DILD.