A Cup of Tea 27 May'10

A drop in the euro set off a late-day slide in stocks Wednesday and sent the Dow Jones industrial average to its first close below 10,000 in nearly four months. The Dow fell 69.30, or 0.7 percent, to 9,974.45. It was the first close below 10,000 since Feb. 8. After trading higher most of the day, stocks turned south after the euro dipped below the $1.22 level in afternoon trading.

News suggesting China was reassessing its euro-zone debt holdings pushed investors into profit-taking mode. The Financial Times said a representative of China's State Administration of Foreign Exchange, which manages the reserves under the country's central bank, has been meeting with foreign bankers in Beijing in recent days to discuss the issue. China Investment Corp., the nation’s sovereign wealth fund, may lower its allocation of assets to Europe.


Like No Other Day --- Very Impressive …
Indonesian stocks surged 7.3 percent on Wednesday, rebounding from three-month lows the day before and leading gains in Southeast Asia. Indonesia's benchmark stock index, Asia's second-best performer this year, posted its biggest one-day surge in 18 months, snapping a five-day losing streak to the lowest since Feb. 12.

Investor just buying the shares after the market lost 16.5% in May. All shares look cheap and everyone just buy the shares combine with speculative and investment, like no other day.

Other Southeast Asian stock markets mostly gained, with Singapore rising 1.7 percent, Thailand climbed 1 percent, Vietnam closed up 1.3 percent and the Philippines added 0.7 percent but Malaysia edged down 0.1 percent.

How about Today? Near Term and Long Term?
Yesterday’s gains are partly a short-term technical rebound. With more bad news coming to equities markets, people will sell again, probably late in the afternoon before the long holiday.

Falling risk appetite in global equities would continue to cut foreign inflows, so gains in the region may be short-lived as investors reappraise euro sovereign risks as well as potential conflict between North and South Korea.

For Near Term; I think, after an extended period of heightened risk appetite, fear is feeding on itself and Asian equities are being sold despite improving macroeconomic data. I just little bit worries; I suspect that global strategist has an underweight recommendation on emerging markets. Nomura International Limited start recommended switching from Brazil or Indonesia into India. Still cautions for near-term and short-term trading maybe wise.

For Long Term; I don’t think our economic on crisis situation, our APBN under control and very healthy. At this level our market only around 11x PE’2011 consensus. We could continue to accumulate strong fundamental stocks. I still put target for JCI at 3050 or 14.88x PE’10 and 12.45x PE’11 (consensus).

Consensus TP & Potensial Upside
Foot Note
ASII
Automotive distributor Astra International, the biggest firm by market capitalization, rose 10 percent after it forecast record 2010 car sales. Astra expects domestic vehicle sales to be above 600,000 units this year, an increase from a previous forecast of 520,000 to 530,000 units, and 23 percent higher than 2009 sales.




BUMI
Coal miner Bumi Resources jumped 20 percent after a court ruled against a tax investigation into one of its units. Indonesia's Supreme Court on Monday rejected an appeal by the country's tax office to continue investigating KPC but Indonesia's tax office will continue its investigation into alleged tax evasion at PT Kaltim Prima Coal, a unit of PT Bumi Resources. Pontas Pane, head of investigation at the tax office said that the ruling from the Supreme Court was only about the administrative process and did not change the basis for the tax investigation.

BUMI average coal selling price fell nearly 16 percent in the January-March period this year. The firm sold coal at an average price of $62.9 per ton in the first quarter, against $74.7 per ton a year ago. Bumi also sold 16 million tons of coal in the January-March period this year, up 41.6 percent from 11.3 million tons in the same period last year.


Bang Juntri
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