MAY 2013 - Kresna Securities

Monthly Bulletin
MAY 2013
Dear Valued Clients,
Global stock markets edged up during Apr13: Asian, EU, and US
markets all rose by 4.8%, 1.0%, and 1.8% before settling at
142.1, 296.7, and 14839.8, respectively. Such robust returns in
Asian markets were apparently driven by optimism from further
monetary expansion, as Bank of Japan reportedly plans to buy
¥7.0tr (US$74bn) worth of bonds a month, in an attempt to reach
a 2.0% inflation target (Japan is still in a deflationary stage,
recorded at -0.9% YoY in Mar13,). Apparently, such positive
returns were also propelled by speculation from the way of
China’s Government would alleviate pressure on its credit policy,
given that its economy remains in recovery, with benign inflation
supportive of such a policy (inflation was recorded at 2.1% YoY
in Mar13). Such optimism managed to mitigate disappointing
economic figures in China; manufacturing was recorded at 50.9
in Mar13 (lower than expectation at 51.2), while its economy only
grew by 7.7% YoY in 1Q13, slower than prior quarter figure of
7.9% YoY and expectation of 8.0% YoY.
Across the ocean, EU markets were lifted by speculation that
ECB would lower its reference rate to 0.5% (to be fixed on
May 2, 2013) amidst disappointing economic figures in EU,
where manufacturing was recorded at 46.5, in contraction since
Aug11. In addition, it was reported that IMF and EU plan in
extending a bailout for Portugal and Ireland, up to seven years,
while they allow Cyprus an extra two years (up to 2018) to meet
its budget targets. In the meantime, US markets managed to
maintain a positive trajectory, suggesting they are influenced by
an unemployment rate, which managed to outperform
expectations, (recorded at 7.6% in Mar13, projected figure was
7.7%), along with its growing economy (US GDP grew by 2.5%
QoQ in 1Q13).
Looking at our domestic markets, trading in JCI was dampened
by an inflation concern, as it accelerated faster than participants’
projection in Mar13, rising by 0.63% MoM in Mar13 (5.9% YoY)
while participants only projected 0.36% MoM (5.56% YoY). In
addition, Bank Indonesia toned down its growth outlook to
6.2%-6.6% (lower than previous forecast of 6.3%-6.8%);
however, the growth outlook was still in line with participants’
projection of 6.25% YoY growth in 2013. Going forward,
deflation in April13 (-0.1% MoM, 5.8% YoY figure) would
support JCI trading. Yet, we are still cautious about the
subsidized-fuel policy as it might propel inflation and trigger
short-term profit taking, given the fact that JCI is traded at
premium multiple of 17.5x FY13 P/E vs MSCI Asia of 14.3x.
Having said this, we project JCI to trade within 4,750-5,180.
Regards,
Kresna Research
Kresna Securities may seek to do business with companies covered in its research reports. Investors should therefore be aware that the firm may have a conflict of interest
that could affect objectivity of this report. Hence, this report should form as one of many others factors in making investment decisions. PLEASE SEE ANALYST
CERTIFICATION AND IMPORTANT DISCLOSURES AT THE END OF THIS REPORT
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