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Market Outlook 2017: Postcard from Asia
January 24, 2017 10:59 WIB

Postcard from Asia
The feedback we got from meetings with foreign clients last week was interesting as our clients mostly have index weighted positions in the Indonesian market, although they are positive on the country in general. Despite having concerns on the budget achievement, political developments and the valuation of the market, they agreed that some stocks such as BBNI and RALS are still attractive considering their growth prospects and valuations.

Valuation does matter. We met with Asian clients last week. Most of them share the view that the valuation of the JCI is not cheap. At 19.3x 12-month forward PE (including HMSP), the JCI is still trading above its 5-year average. As a mean-reverting believer, we think that such a view is reasonable. While investors sought reasons why small cap stocks outperformed the JCI in 2016,
corporate governance and capital market integrity are among the main concerns of the investors we met. Investors are also concerned about political issues following the large rally held on 4 November 2016.

The catalysts for the market are the realization of infrastructure projects and the rebound in commodity prices. We foresee 15% EPS growth for 2017 which our clients believe is reasonable. They also asked about the fund outflows from Indonesia. We explained that the holdings of foreign investors in the free-float portion of the IDX30 (the 30 largest companies) had fallen to as low
as 59%. Budget risk may dampen infrastructure development. Almost all clients expressed concerns in the ability of the government to achieve its budget in terms of tax revenues. As the revenues from the tax amnesty program in 2016 is a one-off event, investors believe that the tax revenues in 2017 will potentially be below the budget. This, in turn, may prompt the government to make budget cuts which would affect infrastructure projects. At the same time, with the leverage that has to be assumed by companies, the future financing risk is high. Nevertheless, the infrastructure companies can divest the projects once completed (as Jasa Marga (JSMR) plans to divest some of its toll roads).

Rebound in commodity prices: sustainable? Investors are skeptical in regard to the rebound in commodity prices as the driver is the reduction in supply rather than demand recovery. However, they still believe that the coal price in 2017 should be higher than it was in 2016. Meanwhile, although the valuation of coal stocks at around 12.3x 2017 PE is considered cheap, a correction in
coal prices would create negative sentiment in this sector. Turnaround companies in the banking and consumer sectors. Investors agree that Bank Negara Indonesia (BBNI), our top pick in the banking sector is attractive and some of them asked about Bank Danamon (BDMN) and Bank CIMB Niaga (BNGA) on the back of these banks’ turnarounds after the new managements have taken new strategies and cleaned up the books to put them on the road to recovery. In the consumer sector, the rebound in commodity prices should boost the people’s purchasing power in commodity
producing regions. This would benefit Ramayana (RALS).

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Stock Shoot - BWPT
January 24, 2017 08:36 WIB

Kinerja saham BWPT cenderung menguat setelah berhasil menguji harga psikologis pada kisaran 300, dengan target tertinggi pada harga 350 sebagai kisaran harga resistance. Kinerja saham BWPT telah menguat sebesar 40%, 34% dan 54% dari rekomendasi beli sebelumnya pada tanggal 28 November 2016 di harga 212.
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Stock Shoot - INCO
January 23, 2017 11:42 WIB

Kinerja saham INCO cenderung menguat untuk menguji angka psikologis pada harga 3.000 dengan target tertinggi pada kisaran harga 3.050. Potensi menguatnya kinerja harga saham INCO disertai dengan harga saham INCO yang berada pada kondisi oversold atau berada pada teritori garis support dengan trend menguat.
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Forecast For Aug 2016

Exports US$ 10.40 bn
Imports US$ 10.20 bn
Trade Balance US$ 0.25 bn

Forecast for 2016

Exports US$ 148.50 bn
Imports US$ 147.20 bn
Trade Balance US$ 1.30 bn

DRI Forecast for Aug 2016

MoM(%) 0.06
YoY(%) 2.87

End of period(% p.a) 5.25

Forecast for 2016

Inflation(%) 3.82
SBI(% p.a) 4.75