(Bloomberg) -- The best-performing Indonesian stock this year has been trading for less than two months.
Shares of PT Citra Putra Realty, which builds and runs hotels and restaurants, have vaulted 1,422 percent since their Jan. 18 debut. The stock slumped as much as 18 percent on Monday, the most on record, as some investors deemed the rally as excessive. The company, which sold the shares at 180 rupiah each in an IPO, is valued at company at 7.04 trillion rupiah ($493 million).
PT Nusantara Properti International, another property-related stock that listed on the same day as Citra Putra, has soared 580 percent.
The craze for IPOs, which have handed a windfall to Indonesian investors in recent years, explains why subdued real-estate prices haven't stopped Citra's shares from soaring. The Jakarta Construction, Property, and Real Estate Index of 71 stocks is little changed since January after falling for two years in a row.
“After the strong rally in Indonesian IPO stocks in recent years, many retail investors are drawn to newly listed companies without considering the corporate or market fundamentals,” said Chandra Pasaribu, head of research at PT Yuanta Sekuritas Indonesia. “Many IPOs are designed to allow the companies or their shareholders to gain access to financing, so the rally in their shares are helping that effort.”
PT Bursa Efek Indonesia, the country's only stock exchange, is targeting to a record 75 IPOs this year, according to Laksono Widodo, a director at the exchange.
Citra Putra tumbled on Monday as investors are worried the “rally won't be sustainable after the strategic purpose of the IPO has been fulfilled,” according to John Teja, a director at PT Ciptadana Sekuritas Asia. The shares have become too expensive relative to the company's fundamentals, he said.
To contact the reporter on this story: Harry Suhartono in Jakarta at hsuhartono@bloomberg.net
To contact the editors responsible for this story: Divya Balji at dbalji1@bloomberg.net, Thomas Kutty Abraham, Ravil Shirodkar
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