20081010-Goldman Sachs-ASEAN Portfolio Strategy

Indonesia: systemic
risk unlikely

Systemic seizure unlikely
Severe price declines on the Jakarta Stock Exchange (JSE) over the last
couple of days and the associated news flow and speculation
surrounding the stability of the settlements system has raised concerns
of a systemic seizure. Despite the system stresses and the associated
unfavorable news flow, we believe that the regulators and policy
makers have the expertise, tools and resources to prevent a downward
spiral in the stock market.
JSE scheduled to reopen on October 10, 2008
Late Thursday afternoon (October 9, 2008), a Reuters news article
quoted Minister of Finance, Ms. Sri Mulyani, as saying that the JSE will
reopen tomorrow (October 10, 2008). In our view, it is unlikely that
selling pressures will subside (not so quickly at least given the shaken
confidence of investors) when the JSE re-opens.
Selective value emerging
In our view, the sharp drop in share prices across the board over the
last few days have produced relatively attractive valuation points for
some blue chip companies that we monitor. At current levels, the larger
Indonesian telcos look interesting. Within our existing coverage, Semen
Gresik (SMGR IJ, Neutral) is currently priced on an EV/ton of installed
capacity of about US$53.