A Cup of Tea 11 May'10

With a $1 trillion bailout package for Greece and the other sick men of Europe, the EU and IMF spurred a huge global rally in stocks Monday, with the Dow rising 405 points. The massive bailout prevented "another systemic seizure of the global financial system" and, "in the short run, markets are happy”.

Markets may be wowed by the size of the package. But the size just means that more debt has been added to a problem that is about too much debt. The process of providing a bridging facility for Greece and possibly other indebted nations will add significantly to regional debt and deficit ratios without actually solving the underlying problem. The core problem is near-zero economic growth, high unemployment and governments unwilling to take painful steps to get people to work more and longer.

I think this package is not the circuit breaker to end the crisis because it involves the creation of more sovereign debt to solve the problem of too much. What investors must focus on is the conditionality of the loans and guarantees.

Oil jumped as much as 4.5 % to $78.51 a barrel, while nickel increased 2 percent to $22,943 a metric ton on the London Metal Exchange.

Indonesian stocks gained over 4 % on Monday after strong first-quarter GDP, and other Southeast Asian markets gained as worries about euro zone debt eased after a European Union package to address the crisis. The Indonesian economy, Southeast Asia's biggest, grew 5.7 % in the first quarter from a year before, the fastest annual pace in more than a year.

Strong buying interest was seen in stocks dependent on the domestic economy, with Bank Central Asia and Astra International rising almost 5 %. Local investors returned to the market today because of Positive sentiment in major markets, mainly because of a strong U.S. stocks outlook, but foreign investors sold further.

Indonesia shares may trade higher today but I believe this is opportunity for short-term trading buy or reducing some position. For long run I still put my target index at 3050 by yearend but I still wait number of inflation, credit growth and the Euro conditionality of the loans and guarantees. World Cup Event usually disturb the liquidity.

Buy or Buy on Lower: Bakrie 7, BMRI, BDMN, BBNI, BBTN, UNTR, PTBA, TLKM, ISAT, INCO, ANTM, TINS and Property related.
Sell on Strength: BBCA, ASII, INDY and ADRO.

Bang Juntri
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