Left Brain Right B - the DBS Vickers Securities Equities Research

Regional Equity Strategy 4Q 2009
Country Assessment
Market Data
Close Chg net % Change 52 week
15-Sep-09 -1mth -1mth -3mth -6mth -12mth High Low
JCI 2,420.1 83.1 3.6 19.2 82.7 39.4 2,420.1 1,111.4
LQ45 472.5 15.7 3.4 19.9 82.7 36.5 472.5 206.7
Agriculture 1,745.1 (112.7) (6.1) 9.4 71.5 33.5 1,913.6 615.0
Basic Industries 235.7 11.2 5.0 24.4 90.8 52.1 235.7 99.7
Consumer 573.1 (13.7) (2.3) 23.2 67.2 54.8 601.2 279.5
Finance 289.5 19.5 7.2 19.4 83.6 45.0 294.9 125.9
Infrastructure 686.3 7.1 1.1 12.0 45.8 29.0 709.1 370.6
Manufacturing 475.1 26.1 5.8 30.7 94.8 64.9 475.1 189.1
Mining 2,236.8 (34.5) (1.5) 13.1 137.9 33.2 2,577.2 770.7
Misc. Industry 592.4 83.8 16.5 46.0 139.3 90.7 592.4 164.7
Property 162.4 7.7 5.0 14.2 68.0 17.7 165.2 94.0
Trade & Service 267.6 16.3 6.5 23.3 80.3 9.0 295.3 129.1
Transactions (JSX):
YTD
Vol (bln shrs) 1,202.6
Val Rptr) 705.0
Source: Bloomberg
MARKET REVIEW
JCI registered another good quarter in 3Q09 by posting a
19% return during the quarter. However, we did not see
election euphoria in the market even though SBY, who was
widely expected to win the election, achieved a victory JCI
had priced in the election outcome.
In 3Q09, miscellaneous industry, manufacturing and
consumer sectors were the market drivers. We also noted a
performance surprise from the consumer sector that was a
laggard in the previous quarter. We believe that recovery in
the sector was driven by higher confidence in the economy,
impact from the election campaign as well as seasonality
factor from the fasting season. Bakrie Group stocks still
dominated trading activities and BUMI and BNBR posted
55% and 47% q-o-q gains, respectively, during the period.
In terms of trading liquidity, there was a slight drop in
average trading value. On average, trading value dropped
5% from previous quarter. However, it was due to
seasonality as we approached Eid Festival holidays.
Meanwhile, some small cap stocks that were laggards in
2Q09 became more active during 3Q09.
LIQUIDITY
Bank Indonesia (BI) finally lowered BI rate to a historic low
of 6.5% in Aug 09 following further easing in inflation. This
marked the ninth straight month of rate-cutting since Dec
08, bringing the cumulative reduction to 300bp. The central
bank took the decision, on the expectation that inflation will
remain benign in FY09 due to lower inflation expectations.
Deposit, lending rates could fall 200bps
% Spread (RHS)
bps
25
Ave time depo rate 1000
20
15
10
5
BI 7% deposit ceiling
Latest: Aug09
0
Jan-03 Jan-05 Jan-07 Jan-09
Source: BI
Ave base lending rate
900
800
700
600
500
400
300
200
100
0
Inflation was still benign in Aug09 with 2.8% y-o-y.
However, in m-o-m terms, there were signs of rising
inflationary pressure. CPI was up 0.6% m-o-m, driven by
inflation in food prices, while it may still rise again driven by
the Eid Festival. BI foresees the potential of rising inflation
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