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17 Maret 2021

MNCS Investment Strategy - 17 March 2021

Welcoming a Healthy Correction Phase

 

Potential Pitfalls on High Expectation of US Stimulus & Vaccine

The JCI surges +19.74%, pacing toward best session since Sep-2020 to current level as equity market rebound on the back of: 1) vaccine development; 2) US stimulus check. The emerging market is likely to receive ample liquidity by the US additional fiscal stimulus of USD1.9 tn and lower FFR. We expect a limited appreciation of the USD Index (DXY) coupled with global central bankers' soft stance continues to attract foreign investors to Indonesian equities and encourage a bullish story for commodity demand. However, JCI tends to move sideways on the last monthly trend. This is due to the 10-year US T-Bill yield that briefly topped the 1.6% level and traded at its highest levelsince Feb-2020, raising concern for higher inflation (US inflation is expected to rise above 2.4% level) rather than economic recovery.

 

Is the party Over on Nickel's stock when Digital Banking stories are on the hype?

No Feast Lasts Forever—Oei Hui-lan”. INCO IJ and ANTM gains significant pace in the last 12 months before a deep plunge in Mar-2021 by -26.75%/-20.91% MoM, respectively. Nickel price correction (-2.40% YTD) primarily due to the re-opening of several nickel mines and negative sentiment coming from Tesla that plans to buy nickel supplies from New Caledonia (4th-largest in the world) instead of Indonesia. However, after the post-decline in nickel's stock, the current market shift focuses on the rise in digital banking-based stocks regarding the potential of M&A. The mid-to-small banks were moving wild in recent weeks, followed by an M&A issue as a consequence of OJK regulations that banks are required to have a minimum core capital of commercial banks of IDR2 tn in FY21E and IDR3 tn in FY22E. Several small banks such as BNBA IJ (+88.31% YTD) and BACA IJ (+47.86% YTD) rally to the highest level following news of their respective acquisitions. Sea Group and Grab’s interest in acquiring Indonesian local lender banks made a sharp increase in market cap value. Investors are on alert for a pullback since it is a very speculative and high risk, especially if the M&A issues are not in place.

 

Investment Opportunity in Sectoral Rotation

US new mega stimulus package supported by the low FFR which will be maintained at 0.25% until FY22E, encourages abundant liquidity in Indonesian equity market. We believe that there is a very good opportunity in commodity-based stocks after a healthy correction first, as discussed earlier at the MNCS Investor Forum 2021. On the technical side, ANTM IJ is now testing the support level of 2,170; a potential test for a technical rebound. Meanwhile, INCO IJ continues in the sideways market; any correction down to the break line at the support area in 4,330 is considered to be a "great chance" to gain a potential reward. We also like CPO stocks given its strong earnings story in FY21E supported by higher ASP and production recovery. Apart from that, we also believe there is potential for the future revival of defensive stock, especially consumer staples, along with the increasing potential short-term risk from the 10-year US T-Bill yield hikes.

 

JCI Tactical Move: SELL on Rally for the Short Term

MNCS believes the JCI is naturally entering a consolidation phase with a potential decline in Mar-2021, in line with our 2021 Primbon Index. Market euphoria seems to be limited along with the short-term risk of USD Index strengthening since USD/IDR is trading at IDR14,400 level. Technically, IDR has the potential to move to the IDR14,550 level. Besides, the vaccines roll out in Indonesia might be taking longer time, considering the wide coverage area and limited number of medical personnel. Therefore, MNCS estimates that JCI has the potential to experience a healthy correction to the 6,000-6,100 level.We maintain our top picks that relies on: 1) Commodities such as ANTM IJ (BUY; TP: IDR2,550), INCO IJ (BUY, TP: IDR7,150), LSIP IJ (BUY, TP: IDR1,920); 2) Domestic recovery plays like banks, auto and construction: BBNI IJ (BUY, TP: IDR8,100), BBRI IJ (BUY, TP: IDR5,100),  ASII IJ (BUY, TP: IDR7,480), WSKT IJ (BUY, TP: IDR2,000) as well as 3) Defensive sector i.e. telcos (TLKM IJ; BUY, TP: IDR4,000) and consumer: ICBP IJ (BUY, TP: IDR11,600), INDF IJ (BUY, TP: IDR9,000).

 

Disclaimer On

ANTM, INCO, LSIP, BBNI, BBRI, ASII, WSKT, TLKM, ICBP, INDF

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