Indonesian Equities

We believe in buying good quality assets at sensible prices rather than mediocre assets at perceived bargain prices. To identify quality assets, we combine solid research with sound investment judgement. 

We consider stock liquidity as important to ensure we would be able to fulfill our obligations. Technical analysis is part of our investment process, considering we invest in a volatile and thin market.

We visit every company in our portfolio and completed around 180 management meetings and company visits during 2016. Engagement activities are designed to improve our understanding of the policies and practices of companies as well as to tackle issues on ESG.

Investment Philosophy and Approach

The three key foundations to our investment philosophy are: 

Active management strategy

  • Our ability to manage large amounts of information and successfully apply it to our individual security selection process gives us a competitive advantage.
  • We make investment decisions based on our continual assessment of which assets are likely to maximise wealth creation. In applying this active approach, a medium-to-long-term decision making framework has been adopted.

Invest in quality assets

  • We believe in buying good assets at sensible prices rather than mediocre assets at perceived bargain prices. To identify quality assets, we combine solid research with sound investment judgment.

Disciplined investment process

  • We continuously monitor and control various investment risks. As professional investment managers, our role is not to avoid risks, but rather to understand the relationship between risk and return, and to manage risk appropriately. Our disciplined methodology also conveys our practice of not relying on short-term predictions in our decision making process. 
  • We place strong emphasis on high quality proprietary research and direct contacts with the companies in which we invest.

 

"We place strong emphasis on high quality proprietary research and direct contacts with the companies in which we invest."

Team Profile

Our investment team has a balanced composition of both senior and younger members that allows marrying deep knowledge and experience in the market with the energy and vigour to deliver outperformance. 

Hazrina Ratna Dewi is the Head of Indonesian Equities and is responsible for looking after the investment process and equity strategy. She has been working in the financial industry since 1993 and has experienced several economic cycles, including the Asian Financial Crisis in 1998. 

Ni Made Muliartini is a Senior Equity Investment Manager responsible for equity analysis and portfolio management. She has worked in the Indonesian equity market since 2000. 

Amica Darmawan is an Equity Investment Manager and is responsible for equity analysis and stock selection. She is also responsible for the implementation of the ESG database the team is working on. She has been working in the financial industry since 2002. 

The team is based in Jakarta, Indonesia. 

6
14
yrs
8
yrs

Stewardship And ESG Integration

In a fast growing and volatile environment, such as Indonesia, we believe that companies with a good understanding and management of ESG risks and opportunities are more likely to succeed over the long term. 

The consideration of ESG factors from both an investor and corporate perspective is still fairly new in Indonesia, with standards lower than in more developed economies. While this means that we must be flexible in our consideration of ESG factors, we believe that as the understanding and adoption of leading approaches to ESG issues grow, the market will adopt higher standards over time. 

In this regard we appreciate companies that communicate openly with investors and which carry out their business plans as disclosed. We have noticed a recent improvement in public companies' disclosure of information. Over time, we hope regulators will play a bigger role in pushing companies to adhere to higher standards of governance.

We incorporate ESG scores with companies' financial forecasts, which influence the discount or premium of company valuations. However, given the depth of the Indonesian equity market, we are limited in how fully we can integrate this method. We also use our understanding of a company's ESG risks as a flag to monitor the company more closely.

Assessment and monitoring

We tailor our ESG analysis to the individual stock. Our analysts write a separate ESG report to supplement the company report and our internal analysis is supplemented by company disclosures, media and external research. We are highly focused on corporate governance as we believe this is still the main concern when investing in Indonesia. Consideration of ESG issues is still a relatively new concept for Indonesian investors, however we believe it will soon be adopted more broadly. 

Integration

We use ESG analysis to determine whether a stock valuation should be discounted as a result of higher risk. If the ESG and sustainability factors can be quantified and have a material impact on profitability, we will integrate the numbers into our forecasts. 

Engagement

We have visited every company in our portfolio and we are in regular contact with management and/or investor relations. We collectively completed around 180 management meetings and company visits during 2016. 

Issues for engagement are identified through detailed company research and analysis. Progress on ESG issues is monitored by analysts through a review of the company visits record. Subsequent meetings with management provide the opportunity to monitor progress on particular topics of concern. 

Engagement activities are designed to improve our understanding of the policies and practices of companies.

"In a fast growing and volatile environment, such as Indonesia, we believe that companies with a good understanding and management of ESG risks and opportunities are more likely to succeed over the long term."

"We use ESG analysis to determine whether a stock valuation should be discounted as a result of higher risk."

Investment Information And Performance

Investment characteristics

Average turnover across all funds
(Five years annualised)
17%
Stock name retention over five year period 55%
% of portfolio companies met with 100%

 

Top five active holdings 

Telekomunikasi Indonesia
Unilever Indonesia
Bank Central Asia
Astra International
HM Sampoerna 

Performance and investment characteristics are as at 31/12/2016
*Performance is quoted pre-fees and in $IDR terms
Source: First State Investments
Please follow this link for information on how our RI and Stewardship Measures are calculated. 

Performance

Portfolios outperforming their relevant benchmark over five years (Weighted by size of fund) 33.00%
Absolute return (per annum) over five years
First State IndoEquity Sectoral Fund
22.63%



Climate Change

The section below provides addition, team specific, information on climate change. Further information on our approach to climate change can be found in our climate change statement

Team Climate Change Statement

Our view is that climate change is an important phenomenon that needed to be addressed in our investment activities. Indonesia economy is very depended on natural resources and more than we like, we have contributed to the acceleration of the global warming. It is our responsibility to make sure that companies we invested in understand what they can contribute to slow down global warming.

Proxy Voting

The team's live proxy voting record is available here 

Proxy voting history by type of resolution

The table below contains the proxy voting history for the team by issue type. The chart provides the same information for 2016.


Abstain Against For 2016 Total
Audit/Financials 1 1 58 60
Capital Management 2 1 72 75
Director election 4 14 40 58
Director Remuneration 6 45 51
Executive Remuneration 3 7 10
General business 43 43
Governance related 8 6 63 77
M&A 6 6
Remuneration Related
Shareholder proposal
Shareholder rights 1 7 8
Grand Total 15 32 341 388

Proxy voting information is as at 31/12/2016
Source: First State Investments / CGI Glass Lewis

Please follow this link for information on how our RI and Stewardship Measures are calculated. 

Voting Independence 

The chart below shows the number of times the team have voted against management recommendations, our proxy advisors recommendation or against both. The purpose of this table is to show the independent judgement which is applied by the team when making voting decisions.