Our Comment

In our market strategy report published yesterday we discussed that the global inflation and negative impact from the US credit market turmoil are expected to still affect the Indonesian market for the rest of this year. Persistently rising oil price puts further pressure to the global economy. Specifically on Indonesia, it expands the budget deficit. Corporate results are expected to start showing slowdown in H208. We see that after a 15% YTD decline, the index has limited downside. However, given the prolonged credit turmoil and global economy slowdown, we are revising our YE08 index target to 2600 (14.3x 2008F PER, 12.0x 2009F PER). Energy and alternative energy sectors are obvious investment picks. Construction is also attractive given higher public spending. Including in the stock picks are Astra Agro Lestari, Bukit Asam, London Sumatra, Perusahaan Gas Negara, Sampoerna Agro and Wijaya Karya. Other stock picks include Aneka Kimia Raya, Kalbe Farma and Ramayana.