A Cup of Tea 12 Aug'10

Southeast Asian stock markets fell on Wednesday, wary of the weaker U.S. economic outlook. The US economic environment kept investors cautious over the pace of recovery in Asia as well as the outlook for exports. In Singapore, the benchmark Straits Times Index ended down 1.2 percent. Thailand, the third best, erased most of its early loss and ended flat. Japan's Nikkei 225 index closed 2.7% lower at 9,293, while Hong Kong's Hang Seng index shed 179 points to close at 21,294.

World stock markets have tumbled as investors worry about the health of the US economy after the Federal Reserve warned that the recovery was likely to be "more modest" in the short term. The Dow Jones finished 265 points lower while European markets closed down 2%. News that China's industrial growth slowed further in July also hitting sentiment. The Fed's assessment of the US economy also put more pressure on the dollar, which hit a 15-year low against the yen. In Europe, leading share indexes in London, Paris and Frankfurt all closed down by more than 2%.

Our Market
On Wednesday Jakarta dropped 0.7 percent, cutting its gain this year to 19.8 percent, still Asia's second best performer. And for today I think our market will continue with under pressure from regional sentiment. JCI will trade lower between ranges 2965-3047 with crucial support at 2948 level.

Indonesia reported 2Q10 GDP growth of 6.2% YoY (2.8% QoQ), above market expectation. Private consumption rose stronger than expected, up 5% YoY, and contributed 2.8 p.p. to headline growth. Gross fixed capital formation was also robust and grew 8% YoY. Growth is expected to remain solid. I believe that our economic was on the right track. Our fundamental economic was so strong.

Healthy inflow will support our market for today. Jakarta recorded net inflows for a fifth straight session, adding just $1.3 million on the day but a total $63.4 million over the past five days.

I think some shares looks interesting. With strong fundamental we can collect on lower some shares for better return in the future. Which Ones?

Cement Sector; Semen Gresik – Surprise in July number - SMGR reported 13.6% m/m growth in sales. SMGR reported July domestic cement sales volume of 1.6mn tonne, up by 2.9% y/y and 13.6% m/m. Despite the Tuban I maintenance in July, the production of Semen Gresik is up by 15% m/m, as the company used up 45% of its clinker inventory. SMGR’s July cement sales number is a surprise. And I also recommended INTP.

Base Metal; Tin continues to provide one of the most robust fundamental pictures across the base metals complex, in 2010 and in 2011” due to a “clear global market deficit. The shortage is due to falling production in Indonesia and robust consumption in Japan and, to a lesser extent, in Europe as manufacturing and electronic sectors increase output after the crisis. With higher average TIN price and lower cost of debt, net profit TINS could surge 10 times on YoY basis.

INCO, Nickel LME inventories have dropped by about 25 percent to five month low at 116,778 tonnes as on 30th July 2010. These factors are supporting nickel and we expect LME nickel will be back to $22,000-23000 in near term.

TLKM, I believe that TLKM will have strong EPS in Q2'10 and will continue into Q3'10m. We are more optimistic in the long term prospects of both cellular and fixed line. Have potential further catalyst from change in frequency fee and new management. TLKM is one of defensive stock in our market.

Coal Sector; UNTR & ADRO, Indonesia steam coal exports prospect have been based on structural demand growth from China, India and Domestic Power Plant, and some of report is addressing India import shortage as soon as 2 years from now. Coal demand in India is expected to grow by 1.2 bn tonnes per annum. Industries continue to growth and demand for energy/electricity will pick up.

Interesting ASII @45000 level watch out !!


Bang Juntri
DISCLAIMER: This report is issued by Bang Juntri. Although the contents of this document may represent the personal opinion of Bang Juntri. We cannot guarantee its accuracy and completeness.