Monday, 17 May 2010
GLOBAL EQUITIES • Stocks fell on Friday on a combination of weak earnings from retailers, Senate backing for limits on credit card fees and concerns over the sustainability of European public debt.
• The Dow Jones industrial average dropped 162.79 points, or 1.51 percent, to end at 10,620.16. The Standard & Poor's 500 Index .SPX fell 21.76 points, or 1.88 percent, to 1,135.68. The Nasdaq Composite Index lost 47.51 points, or 1.98 percent, to close at 2,346.85.
• The CBOE Volatility Index .VIX, or VIX, a measure of market turbulence, surged 17.1 percent to 31.24, echoing moves when the stock market plunged last week.
• Stocks could face more volatility next week as growing doubts about whether Europe can solve its deepening debt crisis are likely to take center stage again.
• European shares closed 3.5 percent lower on Friday, hammered by escalating concerns the tough euro-zone austerity measures would slow growth in the region. FTSE 5262.85 -170.8799 -3.14%, DAX 6056.71 -195.26 -3.12%, CAC 403560.36 -171.18 -4.59%
GLOBAL BONDS • European finance ministers plan to extend the program under which banks can sell government- guaranteed bonds beyond June 30, forcing lenders to provide more information and pay extra to sell the debt, according to a draft of the proposals. Under the plan, banks would be subject to “specific pre- requisites” to continue issuing government-guaranteed bonds, according to the finance ministers’ draft conclusions on financial exit strategy.
• Treasuries climbed for a second day as demand for the safest assets increased on speculation Europe’s sovereign-debt crisis will limit growth and lead to a breakup of its shared currency. U.S. 10-year notes pared a loss for the week even as data showed the U.S. economic recovery building up steam. Benchmark 10-year note yields dropped 8 basis points to 3.46 percent at 4:30 p.m. in New York.
• German bonds rose and Greek bonds fell after Deutsche Bank AG Chief Executive Officer Josef Ackermann said in an interview with ZDF television that Greece, where the crisis began, may not be able to repay its debt in full without “incredible efforts.”
Global COMMODITIES • Crude oil for June delivery fell $2.79 to $71.61 a barrel in New York trading, the lowest settlement since Feb. 5. Copper for delivery in July dropped 3% to $3.134 a pound in New York.
• Gold futures for June delivery fell $1.40, or 0.1%, to $1,227.80 in New York. Nickel futures fell $1,200, or 5.2%, to $21625. CPO on Malaysia’s derivatives exchange settled lower Friday on profit taking ahead of the weekend, down 15 RM or 0.61% at 2457 RM. On weekly average Coal down 3.8% at 102.23 at Newcastle Port.
HONG KONG • Hong Kong’s economy expanded 8.2% in the first quarter, the fastest pace in four years, as exports and retail spending rebounded from the global crisis.
• The increase compared with the 8.3% median forecast in a Bloomberg News survey of 12 economists. Growth was a revised 2.5% in the fourth quarter from a year earlier.
• Merchandise exports jumped 21.6% in the first quarter from a year earlier, household consumption increased 6.5% and business investment rose 10.5%, today’s statement showed.
JAPAN• Japan's Nikkei average lost 1.5% on Friday, hit by a disappointing profit outlook from Sony Corp but the benchmark came off the day's lows as the yen weakened. The broader Topix lost 1.2% to 936.45.
• Worries about a stronger yen and a fall on Wall Street had also prompted profit-taking in morning trade after the Nikkei rose more than 2% the previous day, but market players said many of these concerns eased as the day went on.
• Asian shares on the MSCI ex-Japan index rose 2.1%.
CHINA • China’s benchmark stock index fell, paring a weekly gain, on concern government tightening measures including possibly a property tax and European nations’ debt- cutting will hurt global economic growth.
• The Shanghai Composite Index retreated 13.9, or 0.5%, to 2,696.63. The gauge advanced 0.3% this week, the first weekly gain in six. The CSI 300 Index declined 0.7% to 2,868.02. Futures on the May CSI 300 contract, the most active, fell 1.4%.
• The Shanghai Composite has plunged 18% this year, the world’s fourth-worst performer among the 93 gauges tracked by Bloomberg, on concern the government will add to three increases in banks’ rate reserve requirements and higher housing down payments with possibly rising interest rates to combat inflation and avert asset bubbles.
SOUTH EAST ASIA • Thai stocks eked out slim gains on Friday as investors bought beaten shares with positive corporate earnings, although political violence continued to dent broader market sentiment. The SET index Southeast Asia's cheapest bourse in terms of valuation, finished up 0.29%.
• Singapore slid 0.4%, with Singapore Telecommunications down 0.3%, extending its fall on Thursday after Southeast Asia's biggest telco warned of lower earnings from Singapore and India in the coming year.
• Malaysia was off 0.6%, while Sime Darby fell 4.6% after Sime said it had asked its chief executive officer.
• Among bright spots, Indonesia rose 0.4%.
Sources: Bloomberg, Dow Jones Newswires, Reuters, Associated Press, RBS. 
MARKET OVERVIEW Indonesia shares may fall, weighed by overnight selloff on Wall Street and European Zone amid escalating worries over Euro-zone debt crisis. In the U.S., hair-raising afternoon drop for US stocks amid bubbling pressures from the Euro's tumble and the dollar's rally.
The question is what should we do? And how long will the bearish trend last? … No one knows the answer on how long the bearish trend would be... (For retail investor) You can cash all of your portfolios or just reduce it, if you were a pessimistic...If you were not, you can add some of your portfolios at very cheap prices for midterm investment and enjoy a double gain by the end of the year.
Still, caution may be the theme for today given uncertain outlook post Greek bailout process. Foreign funds may still have been in their high alert and studying more to digest every single thing about what has happened so far.
I believe reasonably high and sustainable economic growth is still within reach for Indonesia. I’d take it as a ‘Buy’ signal because prices are being artificially depressed by an external event. Sometimes a sharp sell-off is the best time to go bargain hunting. Support JSX at 2750 level.
BUMI: Bumi played the savior yesterday on hopes for strong first quarter earnings due to improved sales and sales volume. It is also in the wake of signing an agreement with its lenders on a way of restructuring its debts. It is still a buy on weakness.
ASII: The revised tax rates will effectively cause 15% increase in vehicle prices in the Jakarta area. Jakarta’s 4W and 2W sales account for 25-30% and 20-25% of the industry’s sales volume. This will have negative consequences on Astra International. It could trigger downgrade in the auto sales volume. Neutral or Sell on Strength.
BMRI: Secretary of MSOE Said Didu stated in local papers that Agus Martowardoyo will stay as the nation's largest bank CEO. Given soft NPL level going forward, lower provisioning, well capitalized, strong momentum loan growth, we believe Bank Mandiri will continue to deliver improving ROE, maintain Buy.
BBTN: BBTN is expected to become a national bank over the next three years due to its solid and dominance low-cost housing market. Any corrections in these shares should be regarded as a huge opportunity at collecting these shares at cheaper prices.
BBNI: It is now trading at an attractive p/e ratio of 8.6 times its 2010 prospective earnings, below the banking industrial average of 15.5 times. It is still a buy on weakness of at any levels.
INCO: Nickel price down 5.2%, which is negative for INCO & ANTM. Inco results were6% above consensus. Inco is a pure nickel producer hence greater leverage on nickel price recovery. We see stock catalysts from further sets of strong results, Buy on Weakness.
PLANTATIONS: Crude Palm Oil and Rubber prices tend to be correlated to crude oil prices. Stocks track the underlying commodity. EU is about 12.5% of world CPO demand, and EU consumption grew by 13% in 2010. Plantation stocks across the region have a high correlation to palm oil prices and this would open up significant downside to the sector.
Bang JuntriDISCLAIMER: 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.
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