JAKARTA -- While Indonesian shares have been faring well overall, real estate stocks have been sliding as investors worry about the risk of a tax hike hindering development plans.
The benchmark Jakarta Stock Exchange Composite Index advanced 0.16% from the end of last week to 5,435.27 on Monday, with buying limited ahead of a monetary policy meeting scheduled for Tuesday. Bank Central Asia and other major banks rallied, while real estate shares remained on a downtrend. Ciputra Development, a developer of commercial complexes in Jakarta, dropped 3%, at one point hitting a two-and-a-half-month low.
In February, Indonesia's central bank announced its first interest rate cut in three years. This would normally be a boon for developers, but investors are wary of a possible tax increase.
The government is calling for major infrastructure spending and plans to secure the required funds by lifting tax revenue 30% from 2014 levels this year. It is mulling a 20% value-added tax on apartments or other facilities above a certain price or floor space measurement. Such a move could cause delays for Ciputra, which targets mainly wealthy clients.
Construction stocks have also weakened after being buoyed by hopes for public spending. The government is being pressured into tough decisions, including tax hikes, to bring Indonesia back to fiscal health.