Credit Suisse Indonesia Banks Sector – Not out of the woods yet, but early signs of potential stabilisation are slowly emerging

> In our Indonesia banks sector Asian Daily, dated 16 April 2009, Evidence of worsening asset quality, but the situation may not be as bad as our initial expectation, we had highlighted early signs indicating that the country’s financial sector may be stabilising. This daily provides additional supporting evidence that highlight some early signs of potential stabilisation in the real estate sector.

> In this daily, we highlight that retail sales and property sales may have started to show early signs of stabilisation, although they remain soft. However, they are merely early signs and there remain some risks that these signs may prove to be a red-herring. The recent stabilisation in commodity prices, such as the CPO price, also may provide some support to Indonesia’s purchasing power.

> While we have just seen early signs of potential stabilisation, the share price of the Indonesian banking counters have experienced a significant rally in recent past. At the current level, most of the Indonesian banking counters are trading either at par or at a premium to their regional peers. Thus, we believe that the valuations of the Indonesian banks are not exactly at discounts.