MARKET OUTLOOK

Tuesday, July 15, 2008

Indonesia shares are likely to trade within a consolidation range but may be rebounding due to fresh inflows.
In the U.S., stocks fell as government's salvage of lender IndyMac Bank and plans to assist mortgage-finance giants Freddie Mac and Fannie Mae sparked worries about other lenders in need of safety net. Again it looks like that recent drop on Wall Street was mostly due to its internal financial problems. Here, the government plans to reduce tax in listed companies that have an equal to or more than 40% floating on the Indonesia Stock Exchange. Overall, we have to admit that everything looks uncertain given an absence of fresh leads. The nation's economy looks to set to grow above 6% for 2008, which is above the average of GDP's growth in the Southeast Asian region.
Fresh funds continue to come in high yielding government's bonds assets which have so far strengthened the rupiah and beaten speculators expecting weaker rupiah after recent fuel prices hikes.
The main index may go up and down by 18 points.

Main index: 2241-2279
TLKM: 7,250-7,500. Its ADRs in NY fell 0.8% to $31.99 or equal with IDR7,320. Yesterday's selling was mostly due to the ex-dividend trade. Overall, fundamentals remain sound with first half earnings likely meeting initial targets given an increase in subscriber-base. I still go with BUY on weakness. 12-month target is at IDR8,900.

ISAT: 6,450-6,800. Its ADRs in NY rose 1.6% to $35.50, or equal with IDR6,500. Indosat will hold a shareholders meeting next month to replace board of directors and commissioners to allow representatives from Qatar Telecom to enter the positions. Overall, it looks like that Indosat will receive more positive catalyst from talks about possible hostile take over by a giant foreign company.

PTBA: 14,000-14,900. Its first half earnings may be very impressive given an increase in sales. It is now trading in an oversold area and may be in a good track to rebound. On chart reading, it may try to retest its immediate resistance of IDR14,550 which may further direct its next movement.

BUMI: 6,400-7,100. It is all also about First Half Earnings. It may have better top lines growth, but may be down in bottom lines due to an absence of gains from assets sale. 12-month target is at IDR8,900 based on DCF and higher thermal coal forecasts.

BBRI: 5.350-5,700. It may be stuck within this range for building volume and filling in gaps. Overall, the bank's fundamentals remain sound despite high interest rates environment. BUY at the lower end of the range.

ASII: 19,800-21,200. It may become the defender of the main index given its ability to survive the high inflation and interest rates environment. Second-half motorcycles should remain healthy, but car division may be suffering from a drop given weakening purchasing power. I still go with BUY at any level below IDR20K.

TBLA: 650-700. It has received IDR364 billion in loans from BNI which will be used to develop its 14,000-hectare of palm oil plantation. In any metric, these shares should offer you good return for mid term investment. BUY at any level.

SPECIAL MENTION:

PGAS: 11,200-12,500. It is still trading in an oversold area, but may be rebounding given an increase in buying volume. Fundamentals remain sound with first half net profit likely rising more than 30% on year due to increase in revenue. BUY on weakness

MONITORING:
BISI: 4,500-6,200 BMRI: 2,725-2,900
PNBN: 910-1,100 UNSP; 1,540-1,660
AALI: 25,800-27,300 MIRA: 780-890
ASRI: 105-130 WICO: 60-90