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MARKET OUTLOOK and INVESTMENT STRATEGY

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					"No good tree bears bad fruit, nor does a bad tree bear good fruit”



MARKET OUTLOOK 2010 and
 INVESTMENT STRATEGY

                   On Nov 9th , 2009


         By Jeff Tan, Head of Equity Research
Global Economy rebounds with Positive Outlooks




                              Source: IMF
Sustaining Recovery so Far…




                         Source: IMF
US Economy is Recovering….




               Source: US Bureau of Economics Analysis
But US Unemployment Rate has Skyrocketed to above 10% in
Oct 09 !! This will Remain a Long-term Drag for US and global
economy.




                                     US Bureau of Labor Statistics
At the Same Time , Wealth Creation is Shifting
              Away from G7…
And the Emerging Economies are Becoming
the Net Surpluses….
Meanwhile,   Indonesia continues
              Rising
Our GDP growth never goes negative, not even in one quarter.
       Last two years has been Remarkably Strong!!
The GDP of Indonesia is driven by domestic demand, both
       consumption and investment spending.




                                            Source: Bank Indonesia
          Construction Expansion Continues!!!
              C ement C o nsump t io n ( t o ns) R eb o und s and Ho ld ing U p W ell


5, 000, 000

4, 500, 000

4, 000, 000

3, 500, 000

3, 000, 000

2, 500, 000

2, 000, 000

1, 500, 000

1, 000, 000

  500, 000

         0
              A ug-   Se p -   Oct-   N ov -   Dec-   J a n-   Fe b-   M ar -   A pr -   M ay-   J un-   J ul -   A ug-
               08      08       08     08       08     09       09      09       09       09      09      09       09



                                                                             Source: Indonesian Cement Association
  And Motorcycle and Car Sales Making Pre-Crisis
                      Highs…
        700,000                       60,000
        600,000                       50,000
        500,000
                                      40,000
Units




        400,000                                    Motorcycle Sales
                                      30,000
        300,000                                    Car Sales
                                      20,000
        200,000
        100,000                       10,000
            -                         -
                  Fe

                  M




                  M
                  No

                  De

                  Ja




                  Ap




                  Ju

                  Ju

                  Au
                    ar




                    ay
                     b-
                     n-




                     n-

                     l-0
                      r- 0




                      g-
                      v-

                      c-




                       -0




                        -0
                         09




                         09
                         09
                         08

                         08




                         9

                         09
                          9
                           9




                           9    Source: Gaikindo
Good News: Global deflation suppresses our
Inflation to remain at historical lows, at less
than 3% (y-o-y) Sep09…
Pushing BI rate to historic lows of 6.5%, and with Strong
Rupiah they have more Room to Hold the Rate steady.
Debt Ratio to GDP is declining…




                          Source: Bank Indonesia
Why Invest in Indonesia?
 Our economy is still growing roughly 4-6% for the next 4-5 years
 Large Population creating strong domestic consumption shielding
  it from global slowdown.
 IDR is to remain Strong.
 Inflation is at lows because of global deflationary forces.
 BI Rate is at 6.50%, historical lows, with expectation rising until
  Q4 2010 at 7.75%, which is still quite benign for credit expansion.
 Banking sector remains safe and strong with CAR Ratio at 17%
  and Gross NPL (Non Performing Loans) in July 2009 4.7%.
 With anemic long-term growth in US and Europe forecasted, funds
  will gradually flow out from there and flow into China, India and
  Indonesia.
    Positive Catalysts for Stock market 2010

    Recent Moody’s upgrade of country ratings to a highest
     level in 11 years to ba2.
    Highly-regarded economic ministers are still in place.
    Recovery in US and Europe will stimulate Exports.
    Government prioritizes on infrastructure spending.
    We do not expect any interest rate hikes in US anytime
     soon and medium-term outlook on inflation still remains
     benign as Japan and US still suffer from deflation
 Summary of Key Points and A Forecast


1.   GDP growth is uptrend.
2.   Domestic consumption remains strong.
3.   Our Banking System remains safe and strong.
4.   With forward PE2009 of 15X, Market is expensive by
     fundamental value but still decent by relative valuation with
     historically low US interest rate.
5.   US interest rate will remain low for an extended period of time.


Forecast:
    Therefore, we believe IHSG should be valued at 3000 by
    the end of 2010 with a potential upside of 25% as of Nov
    6th price at 2395. (based on forward PE2010 16x)
             Potential Risks in 2010

• Anti-corruption drive is losing momentum.
• Fiscal stimulus will be reversed in 2010.
• Unexpectedly strong rise in international oil prices
  forcing the government to raised administered fuel
  prices.
• The oncoming El Nino weather pattern leading to
  food shortages and higher inflation especially of
  attribution from higher food prices.
• Foreign Direct Investments are still declining with
  Q2 2009 at 1 billion USD down from 2.5 billion USD
  at Q1.
FDI is still on Down Trend Since Q4 2008




                      Source: Bank Indonesia
        Investment Strategy
• Underweight cash and Overweight Equity medium to
  long term.
• Capital Preservation is always rule number one.
• Investing in a business not just in the company’s
  stocks.
• Value is what you get. Price is what you pay.
• We believe good companies with good prospects will
  fare much better than the index.
• Always leave a margin of safety.
                Active or Passive?

• We recommend a somewhat active portfolio
  management to improve returns for clients who would
  like to participate in an equity market of an emerging
  market like Indonesia.
• Because of high volatility due to hot money’s movement,
  rampant insider trading, volatile liquidities, and share-
  price management.
Take a Peek on Our Favorite Selections with Target
                   In 9 Months:

 Tambang Batu Bara Bukit Asam (PTBA) at Rp16,500,
 Adaro (ADRO) at Rp. 1800, Semen Gresik (SMGR) at
 Rp. 8,000, Mayora (MYOR) at Rp. 3,800, Astra (ASII) at
 Rp 34,000, and Perusahaan Gas (PGAS) at Rp. 4,200.
                     Disclaimer
• This material is issued by PT Sinarmas Sekuritas, a member
  of the Jakarta and Surabaya 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.
Source: Bank Indonesia

				
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posted:9/2/2011
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