The dynamics of listed property
companies in Indonesia
Thi Kim Nguyen
Western Sydney University, Parramatta, Australia and
Faculty of Economics and Business,
Hoa Sen University, Ho Chi Minh City, Vietnam, and
Muhammad Najib Razali
Faculty of Geoinformation and Real Estate,
Universiti Teknologi Malaysia, Johor Bahru, Malaysia
Purpose –As an asset class, listed property companies (PCs) in the emerging Asian markets have
taken on increased significance in recent years. Investors have seen Indonesian real estate investment
trusts (REITs) being regulated to become a property investment vehicle in 2007. This sees
macro-environment in vestment in the Indonesian property market taki ng off to a higher level regionally.
In the background, Ind onesian listed PCs main tain as one of the major investment vehicle s for local and
international invest ors. It has also been the subject of i nvestment for REITs and property investment funds
in Indonesia. The purpose o f this paper is to assess the dyn amics of risk-adjuste d performances and
portfolio diversification benefitsof listed PCs in a mixed-asset portfolio context in Indonesia, from July 2006
to December 2018. The sub -periods of pre-global financial cri sis (GFC), GFC and post-GFC of listed PCs is
Design/methodology/approach –Using monthly total returns, the risk-adjusted performance and
portfolio diversification benefits of listed PCs from July 2006 to December 2018 are assessed, with extended
efficient frontiers and asset allocation diagrams used to assess the role of listed PCs in a mixed-asset portfolio.
Sub-period analyses are conducted to assess the post-GFC recovery of listed PCs.
Findings –Listed PCs delivered hig her returns but carrie d higher risks compared t o stocks before the
GFC, with bonds having bo th the lowest returns and risks. The impact of the GF C was highest for
Indonesian PCs compared to stocks, where properties did not deliver strong risk-adjusted
returns. Notwithsta nding the poor risk-adj usted performance, Ind onesian PCs had low corr elations with
stocks and bonds, sugge sting some level of dive rsification potent ial for stock and bond inv estors.
Stocks outperformed l isted PCs across the sub-periods and the f ull period. Over the post-GFC period, both
stocks and listed PCs rec overed from the crisis, wi th stocks turning arou nd stronger. This analys is
shows a prolonged reco vering and slow boun cing adjustment of lis ted PCs from the econo mic changes.
This research suggests selected listed PCs may be the outperformers, an d, a future contract as a hedge form
for listed PC to be implemented.
Research limitations/implications –The use of the indices of Standard & Poor’s Indonesian
property total retur n (f or listed PCs) are as fol lows: MSCI Indonesia t otal return ( for stocks ),
Indonesia’sten-yearbond’s total return (for bonds) and Indonesia’s thre e-month bill total return ( for cash).
This is used to study the Indo nesian listed PCs and may have aggregatio n effects in its underperformance
and therefore drawing a n egative outcome. The re sults may reflect the comm on fact that the majority of
listed PCs in Indonesia a re property develope rs, which also sees unde rperformances in oth er emerging
Practical implications –Listed PCs have been unde r increasingly adjust ed and positively adapt ed
regulations from the In donesian Governme nt over the post-GFC pe riod. Therefore, in o rder to attract
interest from internat ional investors in pro perty investment in Ind onesia, listed PCs nee d stronger and
more efficiently adapted regulations to a competitive level of respective regulations in the
region and globally. Not withstanding the poo r performance in the tra nsitional stage, Indo nesian listed
PCs bring some diversifi cation benefits to local investors who are ab le to pick the outperformed invested
PCs at the right time. Of th e on-going concerns, in ternational inves tors have no restrict ions on holding
listed PCs in the Indonesi an stock market. This provides room f or improvement in business perform ance in
listed PCs as a result of r egional/global comp etition and internat ional management be ing involved. The
present study deliver s awareness to investo rs, researchers as wel l as policymakers on the I ndonesian
Originality/value –This paper is the first published to present a country profile of significant property vehicles
(commercial property, listed PCs and REITs). It also presents empirical research analysis of the risk-adjusted
Received 1 June 2019
Revised 6 July 2019
10 August 2019
24 October 2019
Accepted 15 November 2019
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Vol.38 No. 2, 2020