CIMB Market oulook Strategy - Fund flows and the emergence of the Internet

May's foreign fund flows remained strong, though weaker than April's. Indonesia remained favoured relative to the rest of Emerging Asia. Unlike April when commodity stocks were the clear stars, defensives took over in May, with the domestic theme continuing to gain traction. Domestic institutions lagged both their foreign counterparts as well as the index. But the local retail investor remained dominant, with the emergence of Internet transactions pushing trade frequencies to a new high. Domestic retail and Internet transactions could be a force to reckon with in the foreseeable future. If so, volatility would rise but liquidity should also improve. We maintain our OVERWEIGHT position on the market and our 1,900 index target (bottom up, under review), with key sectors favored being banks (BMRI, BDMN), commodity (ADRO, BUMI, LSIP), infrastructure/cement (INTP, UNTR), and consumer (GGRM, INDF, KLBF).