UBS Indonesia Market Strategy

Impact of government stimulus package

Wider deficit for 2009
The government proposed a larger deficit of 2.5% of GDP for 2009 compared to the previous estimate of 1.0% of GDP. Around 80% will be due to lower taxes for corporate/consumers and only 20% will be due to labour-intensive infrastructure
spending.

Moderate EPS impact of around 3% in 2009–with three sector exceptions
We expect all companies to record 3% higher EPS due to the lower tax rate (from 30% to 28%) except for the mining, shipping, and property sectors as they are taxed differently. Indonesia aims to lower the corporate tax further to 25% by 2010.

Astra International is a key beneficiary
Astra will be eligible for the additional 5ppt cut in tax rate for a high free-float
company. Also, we believe the lower personal income tax rate and the 25% lower fuel price in the past three months should result in an improved outlook for auto sales. We also expect cement companies to marginally benefit from the higher infrastructure spending.