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No good tree bears bad fruit, nor does a bad tree bear good fruit MARKET OUTLOOK 2010 and INVESTMENT STRATEGY

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No good tree bears bad fruit, nor does a bad tree bear good fruit MARKET OUTLOOK 2010 and INVESTMENT STRATEGY

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    1. "No good tree bears bad fruit, nor does a bad tree bear good fruit” MARKET OUTLOOK 2010 and INVESTMENT STRATEGY

    2. Global Economy rebounds with Positive Outlooks

    3. Sustaining Recovery so Far…

    4. US Economy is Recovering….

    5. But US Unemployment Rate has Skyrocketed to above 10% in Oct 09 !! This will Remain a Long-term Drag for US and global economy.

    6. At the Same Time , Wealth Creation is Shifting Away from G7…

    7. And the Emerging Economies are Becoming the Net Surpluses….

    9. Meanwhile, Indonesia continues Rising

    10. Our GDP growth never goes negative, not even in one quarter. Last two years has been Remarkably Strong!!

    11. The GDP of Indonesia is driven by domestic demand, both consumption and investment spending.

    13. And Motorcycle and Car Sales Making Pre-Crisis Highs…

    14. Good News: Global deflation suppresses our Inflation to remain at historical lows, at less than 3% (y-o-y) Sep09…

    15. Pushing BI rate to historic lows of 6.5%, and with Strong Rupiah they have more Room to Hold the Rate steady.

    16. Debt Ratio to GDP is declining…

    17. Why Invest in Indonesia? Our economy is still growing roughly 4-6% for the next 4-5 years Large Population creating strong domestic consumption shielding it from global slowdown. IDR is to remain Strong. Inflation is at lows because of global deflationary forces. BI Rate is at 6.50%, historical lows, with expectation rising until Q4 2010 at 7.75%, which is still quite benign for credit expansion. Banking sector remains safe and strong with CAR Ratio at 17% and Gross NPL (Non Performing Loans) in July 2009 4.7%. With anemic long-term growth in US and Europe forecasted, funds will gradually flow out from there and flow into China, India and Indonesia.

    18. Positive Catalysts for Stock market 2010 Recent Moody’s upgrade of country ratings to a highest level in 11 years to ba2. Highly-regarded economic ministers are still in place. Recovery in US and Europe will stimulate Exports. Government prioritizes on infrastructure spending. We do not expect any interest rate hikes in US anytime soon and medium-term outlook on inflation still remains benign as Japan and US still suffer from deflation

    19. Summary of Key Points and A Forecast GDP growth is uptrend. Domestic consumption remains strong. Our Banking System remains safe and strong. With forward PE2009 of 15X, Market is expensive by fundamental value but still decent by relative valuation with historically low US interest rate. US interest rate will remain low for an extended period of time. Forecast: Therefore, we believe IHSG should be valued at 3000 by the end of 2010 with a potential upside of 25% as of Nov 6th price at 2395. (based on forward PE2010 16x)

    20. Potential Risks in 2010 Anti-corruption drive is losing momentum. Fiscal stimulus will be reversed in 2010. Unexpectedly strong rise in international oil prices forcing the government to raised administered fuel prices. The oncoming El Nino weather pattern leading to food shortages and higher inflation especially of attribution from higher food prices. Foreign Direct Investments are still declining with Q2 2009 at 1 billion USD down from 2.5 billion USD at Q1.

    22. Investment Strategy Underweight cash and Overweight Equity medium to long term. Capital Preservation is always rule number one. Investing in a business not just in the company’s stocks. Value is what you get. Price is what you pay. We believe good companies with good prospects will fare much better than the index. Always leave a margin of safety.

    23. Active or Passive? We recommend a somewhat active portfolio management to improve returns for clients who would like to participate in an equity market of an emerging market like Indonesia. Because of high volatility due to hot money’s movement, rampant insider trading, volatile liquidities, and share-price management.

    24. Take a Peek on Our Favorite Selections with Target In 9 Months: Tambang Batu Bara Bukit Asam (PTBA) at Rp16,500, Adaro (ADRO) at Rp. 1800, Semen Gresik (SMGR) at Rp. 8,000, Mayora (MYOR) at Rp. 3,800, Astra (ASII) at Rp 34,000, and Perusahaan Gas (PGAS) at Rp. 4,200.

    25. Disclaimer This material is issued by PT Sinarmas Sekuritas, a member of the Jakarta and Surabaya Stock Exchanges, represent the opinion of PT Sinarmas Sekuritas, derived its judgement from sources deemed reliable, however, PT Sinarmas Sekuritas and its affiliated cannot guarantee its accuracy and completeness. PT Sinarmas Sekuritas or its affiliates may be involved in transactions contrary to any opinion herein or have positions in the securities recommended herein and may seek or will seek investment banking or other business relationships with the companies in this material. PT Sinarmas Sekuritas, its employees and its affiliates, expressly disclaim any and all liability for representation or warranties, expressed or implied, here in or omission there from or for any loss how so ever arising from any use of this material or its contents or otherwise arising in connection there with. Opinion expressed in this material are our present view and are subject to change without notice.

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