JP Morgan

* After the G20 finance ministers gave a de facto green light to dollar sellers and vowed to maintain stimulus programs, investors piled aggressively back into risk assets.

* Two interesting reasons why US strategist Tom Lee is bullish on S&P500. Growth over Value; Small-cap over Large-cap; Cyclicals over Defensives; and High Beta over Low Beta.

* Plantations analyst Simone Yeoh calls for 10-15% CPO price rise in 1Q10. Buy AALI.

* PLN will raise power tariff by 20-25% next year, Marubeni & Mitsui will invest US$1.4bn to build 1400MW power plant. (Bisnis Indo).

* West Nusatenggara regional gov't is giving ANTM the chance to offer a similar deal as Multicapital, for the 14% stake in PT Newmont NT. But time is running out, as ANTM may not have the chance to create a new entity. (Bisnis Indo).

* Energi Mega disclosed the purchase price for the 10% stake in Masela gas block. The deal is priced at US$77mn, for a conservative 2P reserves estimate of 14 TCF. That translates to an implied price of US$0.33/boe, vs. normal M&A price range of around US$2.00/boe.

Bullish on US equity market
US equity strategist Tom Lee wrote two reports over the past week on why he is bullish on a 3mo horizon. Both reports are interesting and worth a read.

Reason #1. 23% of fund managers are missing their benchmarks by 500bp.
When looking at performance, the level of fund managers "missing" seemed to be a more important factor, rather than those managers beating. Basically, what this supports is that between October and YE, those behind seem to be more motivated than those ahead, in terms of generating alpha. Those "missing" tend to buy Beta, Small-cap, Growth, and Cyclicals...In general, equities tended to have stronger YE performance when more managers were "missing" their benchmarks (see Figure 8) with 1998 and 1999 serving as good examples - those two years saw a Oct-to-YE rise of 10%-12% and those were the

years in which 30%-plus of managers were missing their benchmarks.
https://mm.jpmorgan.com/servlet/UserDocsHelperServlet?action=openpdf&docId=GPS-342333-0

Best approach on this theme:
. Growth over Value;
. Small-cap over Large-cap;
. Cyclicals over Defensives; and
. High Beta over Low Beta.

Reason #2. S&P500 typically up 12% in the 4mo prior to payrolls turning positive.
As we noted last week, the surge in GDP per worker to an all-time high of $120k, and up 2.8% yoy, is a strong signal that payrolls are likely to turn positive by early 2010, and as early as January (see "US Equity Strategy FLASH: Surge in GDP per worker suggest positive payrolls by early 2010" dated 10/29/09). The period leading to a positive turn in payrolls is extraordinarily strong for the S&P 500. Since 1949, the S&P 500 has gained 12% in the 4 months leading to positive payrolls (see Figure 6), with a gain of 17%-25% seen in the 1975/1980 years, when unemployment surged similar to today.
https://mm.jpmorgan.com/servlet/UserDocsHelperServlet?action=openpdf&docId=GPS-341066-0

Best sectors on this theme
. Technology
. Consumer discretionary
. Basic materials

Implications for Indonesia market
For basic materials - INCO, AALI, BUMI
For high beta - DOID, GJTL
For growth - ASII, INTP

Forecasting CPO price rise in 1Q10 - buy AALI
https://mm.jpmorgan.com/servlet/UserDocsHelperServlet?action=openpdf&docId=GPS-343351-0

Plantation analyst Simone Yeoh expects CPO price to recover 10-15% by 1Q10 driven by tight soybean supply up to Mar-10, the low output season for palm oil, which should lead to declining inventories, and the global economic recovery. He is forecasting an average CPO price of M$2,450/t for 2010E (M$2,240/t YTD in 2009). He sees more upside than downside risk to this forecast, based on risk of El Nino, crude oil price rally, and drought in Argentina (soybean). Meanwhile, prices of fertilizer, potash have fallen by 50% to US$400/t since 1Q09. Key drivers for 1Q10 CPO price rise:

(1) Continued tight soybean supply up to end-1Q10 before the South American harvest sets-in. Supply should remain tight over this period even after accounting for the current US harvest which has pickedup over the past week with improved weather.

(2) Low CPO output season during the period and hence inventories are expected to show a declining trend M/M by 1Q10 after peaking towards end of 2009.

(3) A supportive demand-supply balance for palm oil next year backed also by the global economic recovery with the CPO global stock-usage ratio forecast to drop from 15.4% to 13.9% over Sept-09/Sept-10E (see Table 7 in Appendix section).

Malaysian CPO stocks trade on 18x CY10E (historical mean: 15x), and we would consider locking in some profits at +1SD to historical mean or as sector PE approaches 20x. Closer to home, Astra Agro Lestari (Outperform) trades on 12.9x CY10E with a forecast dividend yield of 5%.

Commodity News
December crude climbed $2.00 to $79.43 a barrel.
December gold added $5.70 to $1,101.40 an ounce.
LME base metal futures closed mostly higher. Aluminium firmed 2.1%, copper 0.8% and nickel 0.4%. Zinc eased 0.2%. The CRB index gained 4.39, or 1.6%, to 273.83.