In 2008, domestic plays deemed as "safe havens" like Unilever (UNVR), banks (BCA, and BRI) and Perusahaan Gas Negara/ PGAS outperformed the market.
On the flip side, commodity-related counters underperformed the market last year with Bakrie Sumatera (UNSP), down 89 percent, followed by Bumi Resources/BUMI (-85 percent), Bayan Resources (BYAN) (-84 percent) and Aneka Tambang/ANTM (-76 percent).
It is worth noting that the steepness and the speed of the price corrections in these commodity stocks did not allow most investors to get out in time. Thus, many are still trapped in these commodity-related counters with selling pressure intensifying as share prices head towards higher levels.
In 2009, Indonesian coal and CPO exporters for the most part have performed better. Adaro Energy (ADRO) has outperformed the market, having risen nearly 53 percent since the beginning of the year.
On the plantation sector, Astra Agro Lestari (AALI) has risen 25 percent followed by United Tractors/UNTR (+23 percent).
This market outperformance by the dollar earners is pricing in positive sentiment stemming from higher commodity prices which have rebounded off their lows, driven by an oil price which has increased from a recent bottom of US$34 per barrel on Dec. 19 to around $47 at present.
Therefore, investors have rotated into dollar earners at the expense of the 2008 outperformers, the stock market darlings or "angels".
At the other end of the spectrum, we see that domestic plays, which were amongst the top outperformers last year, have underperformed in 2009 thus far.
Stocks we like such as Semen Gresik/SMGR (-18 percent), Bank Central Asia/BBCA (-12 percent) and Bank Rakyat Indonesia/BBRI (-9 percent) have been among the worst performers so far this year.
With commodity prices unlikely to further advance in a significant manner due to weak demand caused by the current global economic slowdown, we believe that it is time for investors to rotate back into these domestic "fallen angels".
So far, 11 companies within our coverage have reported the fourth quarter results of last year. With the exception of Indo Tambangraya Megah (ITMG) and Semen Gresik (SMGR), every other company has reported a year-on-year deceleration in its operations in the fourth quarter, as well as lower net profit relative to the previous quarter.
For example, Astra Agro Lestari (AALI) reported year-on-year operating profit growth of -14.4 percent in the third quarter of 2008 which worsened to -73.5 percent in the following quarter, while year-on-year net profit growth of -11.8 percent in the third quarter deteriorated to -25.7 percent in the fourth.
For these exporters, the slowdown should be seen as a precursor of worse things to come when their first quarter of the year's results are released in April 2009.
Even the defensive coal sector, PTBA, although still booking impressive growth, has begun to show some signs of slowdown in the fourth quarter of 2008.
This will only go downhill in the subsequent quarters in our view as coal contracts expire and are replaced by lower coal prices.
With the reporting season around the corner, we advise investors to rotate back into the domestic defensives, the "fallen angels" of the Indonesian stock market.
The writer is the head of research and senior vice president of Bahana Securities