February 9, Strategy: Riding the volatility

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1 Darmawan Halim To subscribe to our Daily Focus, please contact us at Market Index Last Trade Chg (%) MoM YoY JCI 6, MSCI Indonesia MSCI EM 1, HANG SENG 30, KOSPI 2, FTSE 7, DJIA 23, NASDAQ 6, Valuation 2018F P/E (x) P/B (x) ROE (%) JCI Key Rates Last Trade Chg (bps) MoM YoY BI 7-Day RR yr yr FX Last Trade Chg (%) MoM YoY USD/IDR 13, USD/KRW 1, USD/JPY USD/CNY Commodities Last Trade Chg (%) MoM YoY WTI Gold 1, Coal Palm Oil 2, Rubber Nickel 13, Copper Tin 21, Strategy: Riding the volatility Change of heart driving volatility We are witnessing a change of heart in the US market, as the same factors that previously triggered investors to flock to the equity market (i.e., better economic growth, gradual increase in interest rates) are now becoming reasons to exit (or at least take profits). Improvements in indicators such as wage and payroll data, while not unexpected, are being blamed for the recent retreat of the US market, as such data are believed to point to quickening inflation and, hence, faster and higher rate hikes. Overall, we believe the Fed will continue to depend on data in its decision making and will monitor growth progress. Domestic investors play a bigger role now Notably, foreign investors were net sellers in 2017 (in the amount of IDR39.9tr), yet the JCI rose by 20%. This indicates that domestic investors mainly insurance companies and pension funds, in our view are beginning to play a more dominant role. In 2017, investments in equity by these two types of institutions increased by IDR42.3tr (+20.5% YoY) to IDR248.6tr. We believe the bigger role of domestic investors is also one of the reasons the JCI has been less volatile than other markets. Be selective and buy on weakness Due to the JCI s rapid rise over the past couple of months, the forward-looking return has declined, which has triggered profit taking in the past few weeks. In our view, this is healthy because the previous liquidity-driven optimism may have overpriced equity. At this time of rising volatility, we think the appropriate tactical strategy is to be selective and buy on weakness. Within our coverage, although we remain positive on the coal sector, its strong recent run has made it vulnerable. Thus, we prefer laggard sectors/stocks, such as retail (RALS, ACES), media (SCMA, MNCN), metal mining (ANTM), and telco (TLKM). JCI sector performance 2017, Jan. 2018, and Feb (%) 60 FY17 Jan 18 As of 7 Feb 18 JCI Index VS MSCI Emerging Markets (pt) JCI MSCI EM 7,000 6,500 6,000 5,500 5,000 01/17 04/17 07/17 10/17 01/18 (pt) 1,250 1, (13.3) (4.3) Source: Bloomberg, Mirae Asset Sekuritas Research, as of 7 Feb. 2018

2 Local flash IMJS: Indomobil Multi Jasa established a joint venture workshop sector. PT Indomobil Multi Jasa Tbk (IMJS) established a joint venture named PT Indomobil Ekspres Truk on 6 February. This brand-new company will still be moving in the workshop and trade sector for trucks and buses, as well as other lines of business. (Kontan) JSMR: Jasa Marga targets toll road and non-toll revenues of IDR 11.6 trillion this year. PT Jasa Marga Tbk (JSMR) is optimistic it will record revenue growth this year in line with the strategy prepared by the operators of this red plate toll road. JSMR targets revenue from toll road and non-toll road operations to reach IDR 11.6 trillion. Agus Setiawan, Corporate Secretary of JSMR, said the target will grow from last year's revenue. However, he did not mention the amount of growth because it is still waiting for the results of financial statements in (Kontan) SAME: Sarana Mediatama gives guarantee for subsidiary loan of IDR 150 billion. PT Sarana Meditama Metropolitan Tbk (SAME) on February 7, 2018 provided corporate guarantee or corporate guarantees for its subsidiary, PT Kurnia Sejahtera Utama (KSU). KSU is a 99.99% owned subsidiary of SAME. Surina, Director of SAME in today's information disclosure, Mediatama Facility provides corporate guarantee related to the loan facility from PT Bank Permata Tbk. The loan is a term loan of IDR 150 billion with a term of 84 months. (Kontan) AISA: Three Pillars add an extension of the bond repayment time. Pefindo downgraded PT Tiga Pilar Sejahtera Food Tbk (AISA) and I / 2013 Bonds to CCC from previous BB +. The rating agency also downgraded sukuk Ijarah I / 2013 and sukuk ijarah II / 2016 into CCC from BB +. The news circulated a rating cut because AISA plans to extend the term of bond payments. The AISA management justifies this. AISA's Finance Director Sjambiri Lioe said the company is currently planning to extend payment of bonds maturing in April "It is extended to 12 months," Sjambiri said on Thursday (8/2).(Kontan) ANTM: Aneka Tambang managed to sell 13,202 kg of gold throughout PT Aneka Tambang Tbk (ANTM) over the past year recorded nickel production volume of 21,762 tons in feronickel. The amount is up 7% compared to the achievement in Not only in terms of production, sales also grew by 4% to 21,813 tons of nickel in 2017 rather than For the gold commodity the company managed to increase sales by 29% to 13,202 kg. This is in line with the development strategy of both domestic and export gold market including invasion of precious metals of Antam. The contribution of gold is the largest contributor for this company with value reaching IDR 7.37 trillion. (Kontan) ADHI: Adhi Karya will receive the first payment of LRT project IDR 3.88 trillion. PT Adhi Karya Tbk (ADHI) will receive IDR 3.88 trillion from the light rail transit project (LRT). This payment is the first payment of the new LRT payment scheme. President Director of ADHI Budi Harto said, at this time, the audit report from BPKP has been signed. Furthermore, ADHI will file the minutes to PT Kereta Api Indonesia (KAI) as the project manager of LRT. (Kontan) 2

3 Summary Technical analysis Tasrul Jakarta Composite Index (JCI) Prone to Correction Item Data Item Data Close (Feb 8, 2018) 6,544.6 (+0.15%)Trading range 6,480-6,538 Average index performance (%) 2.58 Target Period 47 - Daily 6,538 r-squared Weekly 6,577 Volatility (+/-, %) / Monthly 6,674 Volatility (+/-, point) / Stop loss 6,480 Source: Research Figure 1. Daily trend Uptrend ^JKSE [ ^JKSE ] - Daily - 2/8/2018 Open: 6,544 High: 6,549 Low: 6,519 Close: 6,545 Vol. 10,771,805,184 Prev. Av g. Price: 6,537.6 R-Squared: Period: 47 Std.Dev : 1.75 Volatility (+) : Volatility (-) : V-Ratio : 1.09 Chg.: 0.15% 6, , , , , , , , , Optimization Trading System ^JKSE - Volume = 10,771,805,184.00, EMA(Volume,20) = 10,126,735, ,771,805,184 10,126,735, Dec Feb 5 3

4 Figure 2. Daily MFI optimized,w%r optimized, Stochastic %D & MACD optimized ^JKSE - MFI Smoothed = ^JKSE - Will%R Smoothed = ^JKSE - Stochastic %D = 58.14, MA = ^JKSE - MACD = , Trigger = , Histogram = ^JKSE [ ^JKSE ] - Daily - 2/8/2018 Open: 6,544 High: 6,549 Low: 6,519 Close: 6,545 Vol. 10,771,805,184 Prev. Av g. Price: 6,537.6 R-Squared: Period: 47 Std.Dev : 1.75 Volatility (+) : Volatility (-) : V-Ratio : 1.09 Chg.: 0.15% ^JKSE - Volume = 10,771,805,184.00, EMA(Volume,20) = 10,126,735, , , ,771,805,184 10,126,735,360 Source: Research Nov Dec 2018 Feb 4

5 Figure 3. Weekly Trend Uptrend, MFI optimized,w%r optimized, Stochastic %D & Bollinger Band optimized ^JKSE - MFI Smoothed = ^JKSE - Will%R Smoothed = ^JKSE - Stochastic %D = 80.28, MA = ^JKSE - Weekly 2/8/2018 Open , Hi , Lo , Close (-1.3%) BBTop(Av erage,9,1.8) = 6,697.53, BBBot(Av erage,9,1.8) = 6,076.24, SMA 6, ^JKSE [ ^JKSE ] - Weekly - 2/8/2018 Open: 6,557 High: 6,612 Low: 6,427 Close: 6,545 Vol. 46,310,961,152 Prev. Av g. Price: 6,527.9 R-Squared: Period: 65 Std.Dev : 1.80 Volatility (+) : Volatility (-) : V-Ratio : 1.22 Optimization Trading System Chg.: -1.27% ^JKSE - Volume = 46,310,961,152.00, EMA(Volume,12) = 38,479,761, , , , , , Oct 2017 Apr Jul Oct 2018 Source: Research 46,310,961,152 38,479,761,408 Figure 4. Daily : 6,480 6,538 Figure 5. Weekly : 6,471-6,597 Figure 6. Monthly : 6,414 6,674 ^JKSE [ ^JKSE ] - Daily - 2/8/2018 Open: 6,544 Prev. Av g. Price: 6,537.6 ^JKSE [ ^JKSE ] - Weekly - 2/8/2018 Open: Prev. Av g. Price: 6,527.9 x ^JKSE [ ^JKSE ] - Monthly - 2/8/2018 Open: Prev. Av g. Price: 6,543.4 x R-Squared: R-Squared: R-Squared: Period: 47 Period: 65 Period: 30 Std.Dev : 1.75 Volatility (+) : Std.Dev : 1.80 Volatility (+) : Std.Dev : 2.01 Volatility (+) : ,804.9 Volatility (-) : V-Ratio : 1.09 Volatility (-) : V-Ratio : 1.22 Volatility (-) : V-Ratio : ,674.2 Chg.: 0.15% Chg.: -1.27% Chg.: -0.92% 6, , , , , , , , , ,480.3 ^JKSE - Volume = 10,771,805, ^JKSE - Volume = 46,310,961, ,310,961,152 ^JKSE - Volume = 67,330,879, ,771,805, Feb 30Dec 2018 Feb Apr Jul Oct ,330,879,488 Source: Research Source: Research Source: Research 5

6 Chart 7. JCI Vs. USD/IDR Chart 8. JCI performance (absolute vs. relative) (pt) JCI (L) USD/IDR (R) 6,800 (IDR) 13,800 (%, %p) 24 Absolute Relative ,600 13, ,400 6,200 6,000 5,800 5,600 5,400 11/9 12/7 1/4 2/1 13,600 13,500 13,400 13,300 13,200 13, D 1W 1M 1Y Note: Relative to MSCI EM Index Chart 9. Foreigner s net purchase (EM) (USDmn) ,000-1,500-2,000-2,500-1, , Note: The latest figure for India are February 7 th, Day 5 Days Korea Taiwan Indonesia ThailandPhilippines India Chart 10. Energy price (D-3M=100) 120 CPO WTI Coal /9 12/7 1/4 2/1 Chart 11. Non-ferrous metal price (D-3M=100) Copper Nickel Tin /17 12/17 01/18 02/18 Chart 12. Precious metal price (D-3M=100) Silver Gold Platinum /17 12/17 01/18 02/18 6

7 Table. Key valuation metrics Company Name Ticker Price Market Cap Price Performance (%) P/E(X)* P/B(X)* ROE(%)* (IDR) (IDRbn) 1D 1W 1M 1Y FY18 FY19 FY18 FY19 FY18 FY19 Jakarta Composite Index JCI 6,545 7,304, FINANCIALS Bank Central Asia BBCA 23, , Bank Mandiri Persero BMRI 8, , Bank Rakyat Indonesia Persero BBRI 3, , Bank Negara Indonesia Persero BBNI 9, , Bank Tabungan Negara Persero BBTN 3,640 38, CONSUMER HM Sampoerna HMSP 4, , Gudang Garam GGRM 83, , Indofood CBP Sukses Makmur ICBP 8, , Indofood Sukses Makmur INDF 7,850 68, Kalbe Farma KLBF 1,670 78, Unilever Indonesia UNVR 54, , AGRICULTURAL Astra Agro Lestari AALI 13,050 25, PP London Sumatera Indonesia LSIP 1,310 8, Sawit Sumbermas Sarana SSMS 1,450 13, INFRASTRUCTURE XL Axiata EXCL 2,910 31, Jasa Marga JSMR 5,775 41, Perusahaan Gas Negara PGAS 2,410 58, Tower Bersama Infrastructure TBIG 6,000 27, Telekomunikasi Indonesia TLKM 4, , Soechi Lines SOCI 264 1, N/A N/A Garuda Indonesia GIAA 308 7, BASIC-INDUSTRIES Semen Indonesia SMGR 10,300 61, Charoen Pokphand Indonesia CPIN 3,240 53, Indocement Tunggal Prakarsa INTP 21,150 77, Japfa Comfeed Indonesia JPFA 1,505 17, MINING Indo Tambangraya Megah ITMG 29,000 32, Adaro Energy ADRO 2,420 77, Aneka Tambang ANTM , N/A Vale Indonesia INCO 3,630 36, N/A Tambang Batubara Bukit Asam PTBA 3,130 36, TRADE United Tractors UNTR 38, , AKR Corporindo AKRA 5,725 22, Global Mediacom BMTR 625 8, N/A N/A N/A N/A N/A N/A Matahari Department Store LPPF 10,575 30, Media Nusantara Citra MNCN 1,520 21, Matahari Putra Prima MPPA 448 2, N/A Surya Citra Media SCMA 2,760 40, Siloam International Hospital SILO 8,700 14, PROPERTY Bumi Serpong Damai BSDE 1,795 34, Adhi Karya ADHI 2,340 8, Alam Sutera Realty ASRI 386 7, Ciputra Development CTRA 1,295 24, Lippo Karawaci LPKR , Pembangunan Perumahan PTPP 3,070 19, Pakuwon Jati PWON , Summarecon Agung SMRA 1,155 16, Wijaya Karya WIKA 2,030 18, Waskita Karya WSKT 2,900 39, MISCELLANEOUS Astra International ASII 8, , *Note: Valuation metrics based on Bloomberg consensus estimates 7

8 Sector performance Top 10 market cap performance Name Index Chg (%) Ticker Price Market Cap (IDRbn) Chg (%) Agricultural 1, BKSL IJ , Mining 1, DOID IJ , Basic-Industry WIKA IJ , Miscellaneous Industry 1, BRMS IJ 83 5, Consumer Goods 2, MYRX IJ 115 9, Property & Construction ADHI IJ , Infrastructure 1, BUMI IJ , Finance 1, BHIT IJ 110 5, Trade ABMM IJ , Composite 6, TURI IJ , Source: Bloomberg Top 5 leading movers Top 5 lagging movers Name Chg (%) Close Name Chg (%) Close BBCA IJ ,700 HMSP IJ ,880 TLKM IJ 1.0 4,020 ASII IJ ,375 BBRI IJ 0.5 3,720 UNVR IJ ,375 BMRI IJ 0.6 8,175 PADI IJ ICBP IJ 1.4 8,950 INKP IJ ,200 Source: Bloomberg Economic Calendar Time Currency Detail Forecast Previous 1:00am CAD Gov Council Member Wilkins Speaks 1:01am USD 30-y Bond Auction :50am JPY M2 Money Stock y/y 3.6% 3.6% 7:30am AUD RBA Monetary Policy Statement AUD Home Loans m/m -1.1% 2.1% 8:30am CNY CPI y/y 1.5% 1.8% CNY PPI y/y 4.4% 4.9% 11:30am JPY Tertiary Industry Activity m/m 0.2% 1.1% 1:45pm CHF Unemployment Rate 3.0% 3.0% 2:45pm EUR French Industrial Production m/m 0.1% -0.5% 4:00pm EUR Italian Industrial Production m/m 0.7% 0.0% 4:30pm GBP Manufacturing Production m/m 0.3% 0.4% GBP Goods Trade Balance -11.6B -12.2B GBP Construction Output m/m 0.0% 0.4% GBP Industrial Production m/m -0.9% 0.4% Tentative GBP NIESR GDP Estimate 0.6% 8:30pm CAD Employment Change 10.3K 78.6K CAD Unemployment Rate 5.8% 5.7% 10:00pm USD Final Wholesale Inventories m/m 0.2% 0.2% 11:45pm GBP MPC Member Cunliffe Speaks Note: Time is based on Indonesian local time Source: Forex Factory 8

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