JAKARTA: Amidst great performance of Jakarta Composite Index by often breaking highest record, the existence of cheap shares is going to be rare. Consequently, investors need to diversify their portfolios.The higher index traded in Indonesia Stock Exchange yesterday was stimulated by weakening most indexes in Asias markets. The condition occurred as a respond of US political gridlock concerning on its plan to escalate the debt limit with a deadline on August 2.The expensive valuation of JCI is expected to be dragged down, following higher net income of companies in the second quarter period that will press on price to earning ratio (PER).PER is a valuation used commonly to consider whether a stock is cheap or not. A stock with PER below 10 times is considered cheap.The trend of strengthening stocks makes bluechip shares are getting more expensive, said Diky H. Wirawan, an analyst at PT Kiwoom Securities Indonesia.Foreign investors are numerous in our market because of the dragging debt crisis in Europe and United States. Thus, investors must be careful in choosing the lagging shares, he told Bisnis yesterday.Based on data from Bloomberg, PT Darma Henwa Tbk which has PER 483,23 times and PT Matahari Putra Prima Tbk with PER 142.27 times are amongst the stocks with the highest PER.On the other hand, other shares having low PER, namely PT Rig Tenders Tbk and PT Multipolar Tbk only at 0.07 times and 0.23 times each. Out of 432 stocks, about 221 stocks had more than 10.88 times PER, while the remaining stocks reported under 10.88 times PER.An analyst of PT Recapital Securities Pardomuan Sihombing viewed companies fundamental performance will build up net income per share leading to cheaper and interesting share valuation.Lower interest rate climate, stable politic, and high consumers optimism will strengthen Indonesian companies growth, he said in a market strategy research in the second half of 2011.Relatively high PERPER of listed companies in Indonesia is relatively higher compared those in Asia, said analyst at PT Valbury Asia Securities, Alfiansyah.Based on Bloomberg data, PER of Indonesias stock index was 19.04 times yesterday, the highest in Asia. While PER of Hang Seng index only reached 11.82 times, BSE Sensex was 16.64 times while Nikkei 225 and Dow Jones booked 18.55 times and 13.71 times PER respectively.As a matter of fact the stock valuation in Indonesia is higher compared to other countries in Asia, he said.Nevertheless, it did not impede investors to buy domestic stocks. Besides, the current solid macro economy fundamental also makes Indonesia even more appealing for investors.Market authority keeps monitoring those listed companies with cheap valuation as well as making several approaches so that retail investors prefer to buy those cheap-valuation stocks, said Head of Assessment of Indonesia Stock Exchange, Eddy Sugito.Eddy urged retail investors to be very careful in transacting. There are several reasons why index strengthen, one of them is the solid financial performance in the first semester, yet, we must also consider the companies prospect.The expensive blue chip stocks somehow make the second liner stocks more appealing for investors, said analyst at PT Indo Premier Securities, Ikhsan Binarto.Second liner stocks are appealing for short term investment as its movement is relatively faster compared t blue chip. Nevertheless, blue chip still serves as the first priority for those investors with long term orientation.The potential downgrade was triggered by the fact that the endless debate between US President Barrack Obama and the Congresss spokesman, John Boehner.Dow Jones and S&P Index were opened 0.58% and 0.71% lower to 12,429.94 and 1,322.45 respectively while Morgan Stanley Capital (MSCI) Index slightly rose from 0.1% to 139.18 after declining by 0.5%.Nikkei-225 Index declined by 0.5% to 10,047.19 and Hang Seng Index weakened by 0.13% to 22,541.69 while on the other hand Jakarta Composite Index slumped by 1% or 41.34 points to the highest level of 4,174.11. (15/18)(t01/t02/t04/msw)

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