CS Indo: Global, Asian and Indonesia Equity Strategy

GLOBAL EQUITY STRATEGY: Inflation versus Deflation
· Andrew Garthwaite: We think the most critical issue for investors currently is whether to position their portfolios for deflation (i.e., focus on the next 2–4 years) or inflation (i.e., focus on the end game).
· Over the next few years, we believe the inflation risk has been exaggerated: the US output gap is rising to levels that could leave core CPI falling by 2% and, at the earliest, will close in 2013; we cannot see GDP reverting to trend until 2011; many structural forces of deflation are still in place; already retail sales deflators (ex food) are falling by more than 3% a year in the UK and US; and finally, China is exporting deflation again (with export prices in dollar terms falling 4% a year).
· What asset class tends to do well in periods of rising inflation? We believe gold, index-linked bonds and equities are the best plays (in that order) for hedging inflation. Sectors with a short asset life, high leverage and high correlation with lead indicators should also benefit.

ASIAN EQUITY STRAT: April Consensus EPS Revisions- still early days (Indo Banks)
· Sakthi Siva (Daily): We do not normally comment on trends in consensus EPS revisions until we have at least one full week of data for the month. But this time around, we are rather excited to report that so far in April 2009E, financials EPS has been revised up by 0.7%. We all know the huge outperformance enjoyed by tech on the back of a slowing in the rate of consensus EPS downgrades.
· The next key issues are where are these upgrades in financials coming from, and could it just be a blip. The early April upgrade in financials is coming from three countries – China (+1.8%), Indonesia (+1.3%) and India (+0.4%).

INDONESIA EQUITY STRATEGY: Peaceful 3 weeks campaign- still low political risk
· Arief Wana (Daily): After a peaceful 20-day campaigning, the parliament elections are entering the final phase. Despite the increase in political parties to 38, we believe the key focus remains on the top three – Demokrat, PDIP and Golkar.
· All in all, we believe Indonesia’s political risk is relatively low (which is positive for the market) as the president, SBY, is likely to be re-elected. The worst case, in our view, is going back on current stable but compromised reforms.
· Our top picks remain the domestic players with quality: Telkom, PGAS, United Tractors, Indocement and BBRI.