A Cup of Tea 26 May'10

Most Southeast Asian stock markets fell to multi-week lows on Tuesday due to worries over the euro zone debt crisis and tension on the Korean peninsula. The cumulative effect of the euro zone crisis, the North Korea situation and volatility in currencies has discouraged investors from buying. Indonesia fell 3.7 percent and Thailand slid 3.1 percent. Singapore fell 2.7 percent to its lowest in nearly seven months.

Concern the European debt crisis will spread has driven the MSCI World Index down 16 percent after Greece, Spain and Portugal had their credit ratings cut. Four Spanish banks said they will combine as regulators push lenders to merge with stronger partners, boosting speculation that the nation’s ailing lenders signal widening turmoil.

U.S. stocks erased losses, paring a global retreat in equities, while the euro wiped out most of its declines against the dollar and yen on speculation financial reform will hurt bank earnings less than estimated. Dow finished down 22.82 at 10,043.75.

Just Reminder for Our Economic
Indonesia’s GDP grew at a 5.7% YoY rate from last year’s first quarter. Indonesia’s credit growth is one of its most important drivers, contributing at least one-third of economic growth. Loan-growth trend is already encouraging. Indonesian banks' balance sheets are robust with a low average loan-to-deposits ratio. Against the backdrop of high consumer confidence in Indonesia, banks are also increasingly willing to lend and this should drive economic growth.

Indonesia an upgrade in its sovereign credit rating to BB from BB- by S&P in March 2010. The S&P rating also comes with a positive outlook, suggesting a bias toward further upgrade in the next six to 18 months.

Inflation should be well in the coming months on top of a 10% electricity hike in July, and we could see a more “Neutral” policy language from BI. Despite recent volatility, we expect USD-IDR can still at range 8500-9500 in the coming months.

Technical View
It wills a technical rebound? ... Indonesian stocks are “oversold” and likely to rebound. The market is near-term oversold at 23% retracement and at this level our market only around 10.47x PE’2011 consensus. Yes it is Very risky if market breaks 2480 level, it will trigger selling pressure and next support only at 2410 level.

For today, I don’t think we’ll go and touch a high yesterday intraday chat above 2609.016 level, but I think we can rally here somewhat.

I don’t think our economic on crisis situation, our APBN under control and very healthy. Yes our currencies had under pressure yesterday but BI still control the movement and still at range 8500-9500.
The market has lost 16.5 percent so far in May, adding cheaper valuations were not enough to tempt buyers right now. But for investment strategy, I think we could continue to accumulate strong fundamental stocks. Bulls were inspired to go back into the market.


If You Were a Pessimistic “Leave it” ... If You Were Not, You Can Add Some of Your Portfolios at Very Cheap Prices for Midterm Investment and Enjoy The Gain by The End of The Year (friend said).

Bang Juntri
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