CIMB Market outlook Strategy - Secular bull

Quick counts suggest that SBY could win by a landslide 60% or 74m votes assuming a 70% turnout, exceeding the 69.3m votes he mustered in the second round of the 2004 presidential election. This would be an unprecedented mandate in a direct presidential election. In his second and final term, SBY might push harder for reforms now that he is backed by a stronger mandate and a larger share of parliamentary seats. With the earnings momentum picking up and post-election euphoria, we would not be surprised if investors react strongly, pushing the market ahead of fundamentals. Still on a bottom-up basis, our end-2009 index target has been lifted from 1,900 to 2,250, pricing in a cost of equity of 17% and implying 14.5x and 12.5x CY09-10 earnings. Consumer, bank and infrastructure-related sectors are our key overweights. Our top five picks are Gudang Garam, Indofood, Mandiri, United Tractors and Adaro.