Market View - August 14, 2009

Asian markets rose yesterday as investors reacted positively on the Federal Reserve’s comment that the recession was easing. Hangseng surged 426.06 pts (+2.08%) to 20,861 and Nikkei was up 82.19 pts (+0.79%) to 10,517. European markets also rose as the German and French economy grew 0.3% each in the 2Q from the 1Q. JCI rose 49.13 pts (+2.09%) yesterday to 2,396 led mostly by commodities stocks. DJIA only added 36.58 pts (+0.4%) to 9,398 and Nasdaq was slightly up by 10.63 pts (+0.5%) due to mix data from Walmart, retail sales and initial claims. Walmart posted a 2Q profit of 88 cents per share, 2.33% higher than markets estimate. However, this positive result was overshadowed by dissapointing results from retail sales and initial claims. Retail sales unexpectedly fell 0.1% in July while market expected a 0.8% rise. Initial claims also rose 0.72% to 558,000 last week while market expected it could lower to 545,000. Positive results from German and French economy, together with the Fed’s outlook, in our opinion will boost investors’ confidence. The Bloomberg Professional Global Confidence Index jumped to 58.12 in August, from 39.13. Indicators such as OBV and stochastic show a bullish pattern. However, a decrasing MACD histogram triggers a warning that JCI could take a pullback. We forecast JCI will test its 76.4% fibonacci retracement at 2,425 and if it fails, JCI will retrace to its 61.8% fibo at 2,170. Our range for JCI today is 2,359 to 2,420 and our picks are Indofood(INDF, Buy, R-2,850, S-2,300), PP London Sumatera (LSIP, Buy, R-8,900, S-6,900), Ciputra Development (CTRA, Buy, R-850, S-740), Aneka Tambang (ANTM, Buy, R-2,875, S-2,150) and Timah (TINS, Buy, R-2,450, S-2,075).