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Why Indonesian Stocks Slipped Today

By Brian D. Pacampara, CFA - Sep 18, 2013 at 4:34PM

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Is this meaningful? Or just another movement?

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Indonesia plays like PT Telekomunikasi Indonesia (TLK 4.24%), Market Vectors Indonesia Index (NYSE: IDX), and iShares MSCI Indonesia (NYSE: EIDO) all slipped about 1.5% today after Bank Indonesia announced a new regulation on mortgages.

So what: The new set of rules are designed to control the purchase of second, third, or more homes, reinforcing worries of a growing property bubble in the country. Bank Indonesia is making the move to help ease real estate speculation and reduce the incidents of fraud, but investors are concerned that it will hamper economic growth in the process.  

Now what: Under the new regulation -- which will be implemented later this month -- down payments for additional homes beyond the first one will be increased, with loans for those purchases only given if the property has already been constructed. "We have seen an increase in the property segment for multiple house purchases and that is what we are trying to control," said Bank Indonesia Governor Agus Martowardojo. "We want to maintain healthy mortgage disbursements." Of course, with the Indonesian stock market now off about 15% from its May highs, Fools might want to take this opportunity to look at the region.

Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool recommends Telkom Indonesia. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Stocks Mentioned

PT Telekomunikasi Indonesia Tbk Stock Quote
PT Telekomunikasi Indonesia Tbk
TLK
$31.20 (4.24%) $1.27

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