Good Morning. The new resistance level is now 1900 instead of 2000. But the mkt has been able to hold that in the last 4 days of weakening. Interesting to note that it has been predominantly locals who sold the market recently, hence the large volatility levels in the retail heavy sectors mining, plantation and propert stocks. Foreign institutional investors have actually been consistent (cautious) net-buyers of the big cap stocks, providing some support. With the DXY below 80 again, we should see some decent support in this market again. Dollar continued to slide despite on the positive result of US treasuries overnight where a $40B 2 year auction garnered well over 3:1 bid to cover. I guess there is just no end to this supply chain. Someone should apply the output gap theory to Treasuries. We have another $37 billion 5-year notes on tonight and $27 billion in 7-year notes on June 25. That is $165 billion in Treasuries this week alone. Annualized this you got $8.58 trillion dollars! Yehaa! The JCI has been down about 10% from the high earlier this month. A healthy correction after gaining 60% (USD terms) from the beginning of the year. Our in house technical guru Laurence Balanco view for the JCI is unchanged as the up-trend remains intact as the index continues to make its way towards the next resistance zone at 2,222-2,273. The expected advance up to the 2,222 area should be the final thrust in this advance sequence and should also register a bearish price/momentum divergence. Key support level for the uptrend is found at the 1,891-1907. It would take a close below this level to derail the uptrend off the March low. A couple notes for our favourite commodities: CPO stocks got hammered yesterday presenting a buying opportunity (but CPO spot prices up 6%). Our view is that supply tightness will last until 2010-2011 due to El Nino (El Nino is now pretty much confirmed, focus will shift to predicting the strength of the coming El Nino which the visibility will increase over time). Historically, CPO prices can double in the case of a severe El Nino. That could translate into a massive windfall for plantation companies even tho volumes will drop. Top pick - LSIP and UNSP China IPPs (coal): State Grid stats reported that 2nd 10 days of June saw a power generation pickup of positive 3.8% YoY growth vs. 1st days of 0.2% YoY decline. According to the same source, generation growth is positive in both coastal regions and industry-centric provinces. Guangdong is up 12.3% YoY especially. We have been expecting power output to turn positive starting 3Q09 but June's MTD number suggests a high chance of positive growth in this month. Research Today: Indo banks, highest ROA in Asia and funding future returns Nick Cashmore looked at Indonesian banking sector. We are cautious on the near term outlook but the future of Asia’s most profitable banking market looks rosy. Take any weakness as an opportunity to accumulate Indo banking stocks. The reality is that Indonesia’s bank ROA is the highest in Asia and these conditions are unlikely to dissipate anytime soon. We think there are 3 possible explanations for higher ROA for Indo banks: (1) post 97-98 Asian crisis, Indonesian banks have been focusing on higher margin NON corporate loans. And this includes consumer, micro, and SME (2) ROA is higher now than pre-Asian crisis because back then banks were focusing on small margin related party lending. (3) We also suspect that bankers here still remember the 97-98 crisis and have been overly cautious in lending policies and loan pricing, always assuming the worse. With high provision in mind all the time, loan is being priced accordingly (high). But the high NPL fears never materialized so far, resulted in high NIMs for Indo banks. None of the 3 factors above will change in the near term future, in our view. Consumer, micro, and SME sectors are still very much under-penetrated in Indonesia and this should mean room for growth. Banks will continue to play an important role in supporting Indonesia’s growth rate. Over the past 5 years, banks’ LDR rose from 50% to 64%. There might be an issue with future funding shortage. Current rate of growth can’t be sustained. Banks will have to boost internal capital generation. Key points from the report: *Intermediating growth. Over the past 5 years, total sector assets have grown 69% to US$122bn. Indonesia’s GDP doubled over the same period. *Future funding shortage. Current rate of growth can’t be sustained. Slow internal capital generation means banks will need to boost internal capital generation by cutting div, raising capital, and or constraining credit expansion. *BBCA, BBRI, and BMRI have already reduced payout ratios, BDMN has done the rights issue. *Highest ROA in Asia, unlikely to dissipate soon. *Valuations: near term, one SD above the 5-year average. News Headlines/Others: Politics update. After last week’s Presidential candidate, the VP candidates debate took place last night. Local media reports that the debate was a bit livelier than the presidential one last week but did not spur any heated discussions or controversy. It is probably fair to say that the debates have not changed public perception/support of the candidates thus the SBY-Boediono ticket remains the most popular with less than three weeks into the Presidential elections on July 8, 2009. People able to sue government for poor public services. The Parliament passed the bill into law yesterday. The bill makes it possible to punish public service providers who fail to perform their duties. If the public are injured or die as a result of negligence, that is now a criminal punishment. More regional flights from and to Indonesia. Air Asia has seen short-haul travel within Asian region growing between 5-10% over the last two years. For example Jakarta-Singapore and Bali-Singapore routes will be doubled to four times a day while Bandung (capital of West Java) – Singapore and Bandung-Kuala Lumpur (Malaysia) routes will also be increased. At the same time, long-haul travels have been in decline. Indonesia launches first physical CPO market. The Jakarta Futures Exchange (JFX) launched the first organized physical market for crude palm oil (CPO) in an attempt to create a new price benchmark. PLN looking to issue Rp1.5tn bond. The SOE power company PLN has appointed a consortium of financial advisor to explore the issuance of Rp1.5tn bond. No further details. Perusahaan Gas (PGAS IJ) pays out 157% dividend of 2008 net profit. The annual shareholder meeting approved a dividend payout of Rp1tn or about Rp41.74 per share. PGAS reported a net profit of Rp633.8bn in 2008. Medco Energy (MEDC IJ) update. Japanese buyers have extended the heads of agreement (HOA) for the sale of gas from the planned Donggi-Senoro LNG plant. This will give Medco more time to continue negotiations with the government. Medco is a member of the consortium (holding a 20% stake) that established Donggi Senoro LNG, the company that will construct and operate the liquefied natural gas plant. Koreans may follow the Japanese and Chinese lead in Indonesian infrastructure financing? The Japanese has been actively contributing in Indonesia infrastructure projects within area of the Ministry of Public Works. While the Chinese involves in the national power plant projects as well as the recent Suramadu Bridge. Now, the Korean is preparing to participate in the country’s tollroad project. The Korean International Cooperation Agency (Koica) has proposed to the Government a cooperation scheme with the Ministry of State Owned Enterprise to construct 3,000km Trans-Sumatra tollroad. The plan has ambitious construction schedule of 20 years. No further detail presented however we estimate this project will require Rp300tn of investment over the years. This would be very positive for the logistic in the resources rich Sumatra island. Key Indicators: JCI: 1,914.39 -60.64 (-3.07%), T/O USD 426.5 mil, YTD: +41.24% ADR: TLKM US$28.41 = IDR7,419 ISAT US$23.50 = IDR4,909 It is interesting to note that it has been predominantly locals who sold the market recently, hence the large volatility levels in the retail heavy sectors mining, plantation, property, and Bakrie. Foreign institutional investors have actually been consistent (cautious) net-buyers of the big cap stocks, providing some support. RESOURCES: following an overnight rebound in metal/commodity prices, some recovery is expected. But as players will be mainly local again, sustainability might not be there. CPO: CPO prices saw a remarkable recovery (+6% y'day) as the chances of an El Nino effect hitting the globe are increasing (from 50% to 62% apparently). Expect plantation names to be among the outperformers. RUPIAH: got hit by profit taking as well last couple of days. But staging a slight recovery, thanks to USD weakness. Chart of the Day: breakdown of Indonesian bank assets Did You Know? That the Franchise industry in Indonesia has grown by double digits over the past few years both in sales and in the number of outlets? The industry has survived the test of times, generating close to Rp50tn (US$4.76bn) in sales annually. According to data from the Trade Ministry, there are currently 1,010 franchises, out of which 260 are foreign franchises. In term of number of outlets, there are no less than 42,900 outlets which employ 820k people. Daniel Oen CLSA Indonesia | Institutional Sales Phone: (62-21) 2554-8802 Toll free - HK: 800-938-000 Toll free - SIN: 800-621-1104 Toll free - US: 800-460-2581 daniel....@clsa.com <mailto:daniel....@clsa.com> Apakah wajar artis ikut Pemilu? Temukan jawabannya di Yahoo! Answers. http://id.answers.yahoo.com
