Nikkei 225 plunged 18.3% since Friday (11 March’2011), followed by other Asia Pacific markets. We anticipate that the disasters in Japan would have some adverse impact on Indonesia economy given:
- Japan is the biggest export destination for Indonesia for non oil and gas products, accounting around 14% of total exports in the past 5 years.
- Earthquake damages might lower Japan’s investment to Indonesia.
- We expect the Q2-2011 economic growth will be affected to 6.1% yoy from initial target of 6.2% yoy, while we maintain our real GDP growth of 6.6% yoy in FY 2011.
We view that mining sectors (ANTM, INCO, TINS) and heavy equipment (UNTR, HEXA) could be negatively affected from the tragedy in Japan while coal sectors (BUMI, ITMG, HRUM, ADRO) will benefit the most as they have high exposure to export market (around 90% export).
Market Outlook – Maintain JCI target of 4,209
- JCI has achieved 27% CAGR in 2005-2010 with 19.2% CAGR EPS growth. Currently JCI is trading at 14.0x PER’11, relatively higher than 5 years average of 13.1x. We are cautious on inflation fears but we believe our macro economic remain intact with strong GDP growth of 6.6%.
- The current spread between 10 year government bond and earning yields is narrowed to 1.37%. We expect risk appetite on equities appear when the spread close to 1% or at around 13.0x PER’11
- Our JCI index target remain at 4,209 based on 16.7x PER’11 with expected EPS growth of 18.2%, mainly from commodity related sector.
- Market Update 16 March 2011 (61.5 KiB)