Mansek Commodities: Short-term boost from inventory replenishment, long term outlook still uncertain

Commodities: Short-term boost from inventory replenishment, long term outlook still uncertain

We consider the recent run-up in commodity prices as a sign of recovery in commerce from a total collapse in last December. The improvement in the Baltic Dry Index (BDI) was due to inventory replenishment after destocking in 4Q08. We would no longer be optimistic post-inventory adjustment and suggest to par down holdings on commodity stocks. We still play defensive on the sector with coal, a proxy for utilities, as our pick. Plantation is our second choice as the products are mostly of daily ! necessiti es. We remain averse to metals, as we do not see any pick-up in demand. We have a Buy recommendation for Indotambang (ITMG, Rp10,050, Buy, TP:Rp15,129), Bukit Asam (PTBA, Rp7,700, Buy, TP:Rp9,380), Adaro (ADRO, Rp830, Buy, TP:Rp1,200) for coal sector, and Bakrie Sumatera Plantation (UNSP, Rp285, Buy, TP:Rp350) for plantation.