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9/28/2011 9:09:29 AM:

A New Reality But Not Without Opportunity

Our outlook is that in the short term IHSG will still be experiencing immense volatilities depending on day-to-day and sometime hourly developments in EURO Zone. However, six months from now, I expect IHSG to be higher than the present level at 3500. We believe Indonesia is in a better shape today than in the end of 2008 and a lot better than in 1998 in term of all available economic indicators. After pricing in the gloomy global outlook, many mainstream economists still expect Indonesia GDP to grow at least 6% next year and at a minimum 6+ in 2013 due to a boost in consumption closing to 2014, the election year . Bank Indoneis still possesses 100+ billion foreign reserve today compared with 60+ billion USD back in 2008. Our capital market regulators are a lot stricter today than in 2008. There are less leverage and margin trading among local retail investors. Repo problems are not as significant as in 2008. Our fiscal and Monetary indicators remain strong and safe. Furthermore, unlike in 2008, IHSG right now is less reliant on commodity sector; and more dependent on consumer good, which still possesses robust and less volatile earnings. Consequently, I do not expect the current corrections will be as deep and as long as in 2008. That is why I believe this presents a terrific opportunity to buy good quality shares at a very attractive price. In that regard, we will continue to like consumer good names with domestic focused (ICBP & ROTI), but investors should begin to accumulate deeply battered coal mining stocks along the way as a few names have become ridiculously cheap. (such as ITMG, ADRO and for a daredevil, possibly BUMI) (Note: Talking to industry experts, we believe coal orders will still be strong at least through Jan 2012).

However, again, even though Indonesia's economy is still remarkably strong and less connected to the slowing global economy, large foreign participation in our capital market has caused a closer linkage to their capital markets and their respective economies. Thus, whatever critical developments in their economy and financial markets will have affect on ours. For example, IHSG could go down five percent today and would go up the same amount tomorrow just because of a comment from an influential EU policymaker. This has become the new reality for IHSG for the time being as the global economy and markets continue to be driving by erratic European policymakers who are still confused on the directions they want to go. Moreover, as one of the best performing stock market and bond market in Asia Pacific (even after 20% IHSG correction since August High), Our capital market, unfortunately, remains in the frontline of systematic global profit taking should global outlook become worse. In that respect, we advice our clients to remain cautious and be conservative. We recommend investors to conserve a lot of cash (30+ percent), but for more experienced investors, we advise to engage in short-term trading to capitalize on the extreme volatilities: SELL when IHSG is up significantly and BUY on BIG Corrections.

Positive Catalysts:
1. Q3 Corporate Earning Reports will be out in the Oct-Nov. Earnings are expected to be robust
2. Upgrade to Investment Grade.
3. Passing of the land acquisition bill.
4. IHSG is trading at PE2012F 12X.
5. Potential stimulus package from the Govt to fight global recession.
6. Bank Indonesia, albeit a bit slow at first strike last week, has done its job very well in past couple days in stabilizing the forex market.

Negative Catalysts:
1. The persistent rise in yields on government debt issued by Italy and Spain. (IMF and EU need to step in immediately!)
2. Greece will default (but need to be conducted in nuclear explosion proof environment, so it will not trigger outright global domino effects).



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This material is issued by PT Sinarmas Sekuritas, a member of Indonesia Stock Exchanges, represent the opinion of PT Sinarmas Sekuritas, derived its judgement from sources deemed reliable, however, PT Sinarmas Sekuritas and its affiliated cannot guarantee its accuracy and completeness. PT Sinarmas Sekuritas or its affiliates may be involved in transactions contrary to any opinion herein or have positions in the securities recommended herein and may seek or will seek investment banking or other business relationships with the companies in this material. PT Sinarmas Sekuritas, its employees and its affiliates, expressly disclaim any and all liability for representation or warranties, expressed or implied, here in or omission there from or for any loss how so ever arising from any use of this material or its contents or otherwise arising in connection there with. Opinion expressed in this material are our present view and are subject to change without notice.